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What changed in AMERISERV FINANCIAL INC /PA/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AMERISERV FINANCIAL INC /PA/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+369 added−375 removedSource: 10-K (2024-03-27) vs 10-K (2023-03-27)

Top changes in AMERISERV FINANCIAL INC /PA/'s 2023 10-K

369 paragraphs added · 375 removed · 190 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

52 edited+49 added−33 removed45 unchanged
Biggest changeUnder the current rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer above its minimum risk-based capital requirements of 2.50% of total risk weighted assets. ​ The capital to risk-adjusted assets requirements for minimum capital plus the applicable buffer, and the requirement to be well capitalized, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Minimum Capital ​ Well ​ Plus Buffer Capitalized Common equity tier 1 capital ratio 7.00 % 6.50 % Tier 1 capital ratio 8.50 % 8.00 % Total capital ratio 10.50 % 10.00 % ​ DIVIDEND RESTRICTIONS The primary source of cash to pay dividends, if any, to the Company’s shareholders and to meet the Company’s obligations is dividends paid to the Company by the Bank and the Trust Company.
Biggest changeGenerally, a bank is prohibited from paying any dividend or making any capital distribution or paying any management fee to its holding company if the bank would thereafter be undercapitalized. 11 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ Minimum Capital ​ Well ​ Plus Buffer Capitalized Common equity tier 1 capital ratio 7.00 % 6.50 % Tier 1 capital ratio 8.50 % 8.00 % Total capital ratio 10.50 % 10.00 % ​ DIVIDEND RESTRICTIONS The primary source of cash to pay dividends, if any, to the Company’s shareholders and to meet the Company’s obligations is dividends paid to the Company by the Bank and the Trust Company.
It is a full-service bank offering (i) retail banking services, such as demand, savings and time deposits, checking accounts, money market accounts, secured and unsecured consumer loans, mortgage loans, safe deposit boxes, holiday club accounts, and money orders; and (ii) lending, depository and related financial services to commercial, industrial, financial, and governmental customers, such as commercial real estate mortgage loans (CRE), short and medium-term loans, revolving credit arrangements, lines of credit, inventory and accounts receivable financing, real estate construction loans, business savings accounts, certificates of deposit, wire transfers, night depository, and lock box services.
It is a full-service bank offering (i) retail banking services, such as demand, savings and time deposits, checking accounts, money market accounts, secured and unsecured consumer loans, mortgage loans, safe deposit boxes, holiday club accounts, and money orders; and (ii) lending, depository and related financial services to commercial, industrial, financial, and governmental customers, such as commercial real estate mortgage loans (CRE), short and medium-term loans, revolving credit arrangements, lines of credit, inventory and accounts receivable financing, real estate construction loans, business savings accounts, time deposits, wire transfers, night depository, and lock box services.
It is the policy of the Federal Reserve that bank holding companies should pay cash dividends on common stock only out of income available from the immediately preceding year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition.
It is the policy of the Federal Reserve that bank holding companies should generally pay cash dividends on common stock only out of income available from the immediately preceding year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition.
The Company has consistently viewed its positive union relationships as a potential source of additional revenue. Examples of success in these efforts include the previously mentioned ERECT Fund where the wealth management group is trustee for this $250 million fund whose purpose is to invest in commercial construction projects with the requirement that they utilize union labor.
The Company has consistently viewed its positive union relationships as a potential source of additional revenue. Examples of success in these efforts include the previously mentioned ERECT Fund where the wealth management group is trustee for this $243 million fund whose purpose is to invest in commercial construction projects with the requirement that they utilize union labor.
Its location along I-99 draws from a large trade area over a wide geographic area that extends to State College and Johnstown. It serves as the headquarters for Sheetz Corporation, which ranks on Forbes list of the top privately owned companies.
Its location along I-99 draws from a large trade area over a wide geographic area that extends to State College and Johnstown. It serves as the headquarters for Sheetz Corporation, which ranks on Forbes’ list of the top privately owned companies.
The Company’s primary credit risk occurs in the loan portfolio with limited credit risk within the investment portfolio due to holdings of corporate and municipal securities. The Company uses its credit policy and disciplined approach to evaluating the adequacy of the allowance for loan losses (the ALL) to monitor and manage credit risk.
The Company’s primary credit risk occurs in the loan portfolio with limited credit risk within the investment portfolio due to holdings of corporate and municipal securities. The Company uses its credit policy and disciplined approach to evaluating the adequacy of the allowance for credit losses (the ACL) to monitor and manage credit risk.
COMPETITION Our subsidiaries face strong competition from other commercial banks, savings banks, credit unions, savings and loan associations, and other financial or investment service institutions for business in the communities they serve. 7 Table of Contents Several of these institutions are affiliated with major banking and financial institutions which are substantially larger and have greater financial resources than the Bank and the Trust Company.
COMPETITION Our subsidiaries face strong competition from other commercial banks, savings banks, credit unions, savings and loan associations, and other financial or investment service institutions for business in the communities they serve. Several of these institutions are affiliated with major banking and financial institutions which are substantially larger and have greater financial resources than the Bank and the Trust Company.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities below. 10 Table of Contents PRIVACY PROVISIONS Federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about customers to non-affiliated third parties.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities below. PRIVACY PROVISIONS Federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about customers to non-affiliated third parties.
Pittsburgh is rich in art and culture. Pittsburgh museums and cultural sites include the Andy Warhol Museum, the Carnegie Museum of Art, the Frick Art & Historical Center, and Pittsburgh Center for the Arts among numerous others. Pittsburgh is also the home of the Pirates, Steelers and Penguins.
Pittsburgh museums and cultural sites include the Andy Warhol Museum, the Carnegie Museum of Art, the Frick Art & Historical Center, and Pittsburgh Center for the Arts among numerous others. Pittsburgh is also the home of the Pirates, Steelers and Penguins.
The unemployment rate for the Pittsburgh MSA decreased from a 6.4% average in 2021 to a 4.3% average in 2022. Altoona is the business center of Blair County, Pennsylvania with a strong retail, government and manufacturing base. The top field of employment in Altoona and the metro area is healthcare.
The unemployment rate for the Pittsburgh MSA decreased from a 4.3% average in 2022 to a 3.7% average in 2023. Altoona is the business center of Blair County, Pennsylvania with a strong retail, government and manufacturing base. The top field of employment in Altoona and the metro area is healthcare.
Approximately 150 non-supervisory employees of the Company are represented by the United Steelworkers AFL-CIO-CLC, Local Union 2635-06. The Company is under a four-year labor contract with the United Steelworkers Local, which will expire on October 15, 2025. The contract calls for annual wage increases of 2% during the life of the contract.
Approximately 149 non-supervisory employees of the Company are represented by the United Steelworkers AFL-CIO-CLC, Local Union 2635-06. The Company is under a four-year labor contract with the United Steelworkers Local, which expires on October 15, 2025. The contract calls for annual wage increases of 2% during the life of the contract.
“Happy Valley” is another often-used term to refer to the State College area, including the borough and the townships of College, Harris, Patton, and Ferguson. The unemployment rate for the State College MSA decreased from a 4.6% average in 2021 to a 3.2% average in 2022 and remains one of the lowest of all regions in the Commonwealth.
“Happy Valley” is another often-used term to refer to the State College area, including the borough and the townships of College, Harris, Patton, and Ferguson. The unemployment rate for the State College MSA decreased from a 3.2% average in 2022 to a 2.9% average in 2023 and remains one of the lowest of all regions in the Commonwealth.
The Hagerstown, MD-Martinsburg, WV MSA unemployment rate decreased from a 4.5% average in 2021 to a 3.4% average in 2022. The Company also has loan production offices in Wilkins Township in Allegheny County and Altoona in Blair County, Pennsylvania. Wilkins Township in Allegheny County, Pennsylvania is located 15 miles east of the city of Pittsburgh.
The Hagerstown, MD-Martinsburg, WV MSA unemployment rate decreased from a 3.4% average in 2022 to a 2.8% average in 2023. The Company also has loan production offices in Wilkins Township in Allegheny County and Altoona in Blair County, Pennsylvania. Wilkins Township in Allegheny County, Pennsylvania is located 15 miles east of the city of Pittsburgh.
The Bank is an FDIC-insured institution, therefore, deposits are insured up to the standard insurance amount of $250,000 per depositor. As of December 31, 2022 and 2021, the estimated amount of uninsured deposits was $316.5 million and $326.1 million, respectively.
The Bank is an FDIC-insured institution, therefore, deposits are insured up to the standard insurance amount of $250,000 per depositor. As of December 31, 2023 and 2022, the estimated amount of uninsured deposits was $384.5 million and $316.5 million, respectively.
Investment securities available for sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ AT DECEMBER 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL ​ ​ ​ ​ ​ ​ ​ U.S.
Investment securities available for sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ AT DECEMBER 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL ​ ​ ​ ​ ​ ​ ​ U.S.
While the city is historically known for its steel industry, today its economy is largely based on healthcare, education, technology and financial services. The city of Pittsburgh is home to many colleges, universities and research 8 Table of Contents facilities, the most well-known of which are Carnegie Mellon University, Duquesne University and the University of Pittsburgh.
While the city is historically known for its steel industry, today its economy is largely based on healthcare, education, technology and financial services. The city of Pittsburgh is home to many colleges, universities and research facilities, the most well-known of which are Carnegie Mellon University, Duquesne University and the University of Pittsburgh. Pittsburgh is rich in art and culture.
It also offers an affordable cost of doing business and living, all within an hour of the Washington, D.C./Baltimore regions. There are also plenty of facilities and land slated for industrial/commercial development. Hagerstown has become a choice location for manufacturers, financial services, and distribution companies.
It has a workforce of over 400,000 with strengths in manufacturing and technology. It also offers an affordable cost of doing business and living, all within an hour of the Washington, D.C./Baltimore regions. There are also plenty of facilities and land slated for industrial/commercial development. Hagerstown has become a choice location for manufacturers, financial services, and distribution companies.
The high-tech defense industry is the main non-health care staple of the Johnstown economy, with the region fulfilling many federal government contracts, punctuated by one of the premier defense trade shows in the U.S., the annual Showcase for Commerce.
Johnstown is home to The University of Pittsburgh at Johnstown, Pennsylvania Highlands Community College and Conemaugh Health System. The high-tech defense industry is the main non-health care staple of the Johnstown economy, with the region fulfilling many federal government contracts, punctuated by one of the premier defense trade shows in the U.S., the annual Showcase for Commerce.
Economic conditions are stronger in the State College market and have demonstrated the same improvement experienced in the national economy. The community is a college town, dominated economically and demographically by the presence of the University Park campus of the Pennsylvania State University.
Slow economic conditions, coupled with a declining population trend, creates a growth challenge moving forward. Economic conditions are stronger in the State College market and have demonstrated the same improvement experienced in the national economy. The community is a college town, dominated economically and demographically by the presence of the University Park campus of the Pennsylvania State University.
Underwriting of loans within this category is pursuant to Freddie Mac/Fannie Mae underwriting guidelines, with the exception of Community Reinvestment Act (CRA) loans, which have more liberal standards. A meaningful portion of this portfolio consists of home equity loans. The major risk in this category is that a significant downward economic trend would increase unemployment and cause payment default.
Underwriting of loans within this category is pursuant to Freddie Mac/Fannie Mae underwriting guidelines, with the exception of Community Loan Program loans, which have specialized internal loan program standards. The major risk in this category is that a significant downward economic trend would increase unemployment and cause payment default.
The Economic Growth, Regulatory Relief, and Consumer Protection Act was enacted into law in 2018 and was designed to ease certain restrictions imposed by the Dodd-Frank Act. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted into law on March 27, 2020 in response to the COVID-19 pandemic.
The Economic Growth, Regulatory Relief, and Consumer Protection Act was enacted into law in 2018 and was designed to ease certain restrictions imposed by the Dodd-Frank Act.
These means are used in varying combinations to influence overall growth of bank loans, investments, and deposits, and may also affect interest rate charges on loans or interest paid for deposits.
Government securities, changes in the federal funds rate and discount rate on member bank borrowings, and changes in reserve requirements on bank deposits. These means are used in varying combinations to influence overall growth of bank loans, investments, and deposits, and may also affect interest rate charges on loans or 8 Table of Contents interest paid for deposits.
Personal guarantees are normally required during the construction phase on construction credits and are frequently obtained on mid to smaller CRE loans. In addition to economic risk, this category is subject to geographic and portfolio concentration risk, each of which are monitored and considered in underwriting.
Personal guarantees are frequently required on CRE loans especially if there is a speculative component to the credit. In addition to economic risk, this category is subject to geographic and portfolio concentration risk, each of which are monitored and considered in underwriting.
AVAILABLE INFORMATION We file annual, quarterly and current reports, proxy statements and other information with the SEC. These filings are available to the public on the internet at the SEC’s website at http://www.sec.gov . Our internet address is http://www.ameriserv.com .
These filings are available to the public on the internet at the SEC’s website at http://www.sec.gov . Our internet address is http://www.ameriserv.com .
In addition to being located adjacent to I-99 and a major highway system, Altoona also has easy access to rail and air transportation. The average unemployment rate in the Altoona MSA decreased from 6.0% in 2021 to 4.1% in 2022. EMPLOYEES The Company employed 329 people as of December 31, 2022 in full- and part-time positions.
In addition to being located adjacent to I-99 and a major highway system, Altoona also has easy access to rail and air transportation. The average unemployment rate in the Altoona MSA decreased from 4.1% in 2022 to 3.5% in 2023.
The following is a summary of key data (dollars in thousands) and ratios of the Bank at December 31, 2022: ​ ​ ​ ​ ​ ​ Headquarters Johnstown, PA Total Assets ​ $ 1,350,198 ​ Total Investment Securities ​ 231,750 ​ Total Loans and Loans Held for Sale (net of unearned income) ​ 990,825 ​ Total Deposits ​ 1,111,276 ​ Total Net Income ​ 8,593 ​ Asset Leverage Ratio ​ 9.39 % Return on Average Assets ​ 0.65 ​ Return on Average Equity ​ 7.10 ​ Total Full-time Equivalent Employees ​ 247 ​ ​ RISK MANAGEMENT OVERVIEW Risk identification and management are essential elements for the successful management of the Company.
The following is a summary of key data (dollars in thousands) and ratios of the Bank at December 31, 2023: ​ ​ ​ ​ ​ ​ Headquarters Johnstown, PA Total Assets ​ $ 1,378,660 ​ Total Investment Securities (net of allowance for credit losses) ​ 222,213 ​ Total Loans and Loans Held for Sale (net of unearned income) ​ 1,038,401 ​ Total Deposits ​ 1,162,066 ​ Total Net Loss ​ (250) ​ Asset Leverage Ratio ​ 8.78 % Return on Average Assets ​ (0.02) ​ Return on Average Equity ​ (0.22) ​ Total Full-time Equivalent Employees ​ 236 ​ ​ RISK MANAGEMENT OVERVIEW Risk identification and management are essential elements for the successful management of the Company.
The Trust Company is subject to regulation and supervision by the Federal Reserve Bank of Philadelphia and the PDB. MONETARY POLICIES Commercial banks are affected by policies of various regulatory authorities including the Board of Governors of the Federal Reserve System (the Federal Reserve). An important function of the Federal Reserve is to regulate the national supply of bank credit.
MONETARY POLICIES Commercial banks are affected by policies of various regulatory authorities including the Board of Governors of the Federal Reserve System (the Federal Reserve). An important function of the Federal Reserve is to regulate the national supply of bank credit. Among the instruments of monetary policy used by the Federal Reserve are: open market operations in U.S.
When used in this report, the “Company” may refer, depending on the context, to AmeriServ Financial, Inc. individually or AmeriServ Financial, Inc. and its direct and indirect subsidiaries. The Company’s principal activities consist of owning and operating its two wholly owned subsidiary entities.
The Company’s other wholly owned subsidiary is AmeriServ Trust and Financial Services Company (the Trust Company) which was formed in October 1992. When used in this report, the “Company” may refer, depending on the context, to AmeriServ Financial, Inc. individually or AmeriServ Financial, Inc. and its direct and indirect subsidiaries.
In the normal course of business, the Company is subject to various types of risk, which includes credit, interest rate and market, liquidity, operational, legal/compliance, strategic/reputational and security risk. Additionally, in 2022, the Company continued to monitor the risks stemming from the COVID-19 pandemic.
In the normal course of business, the Company is subject to various types of risk, which includes credit, interest rate and market, liquidity, operational, legal/compliance, strategic/reputational and security risk. The Company seeks to identify, manage and monitor these risks with policies, procedures, and various levels of oversight from the Company’s Board of Directors (the Board) and management.
The process is intended to allow identification of emerging risk, in part, to determine any future change to lending policy, underwriting practices or broader lending strategy prior to any indication of performance deterioration. Residential Real Estate — Mortgages This category includes mortgages that are secured by residential property.
The process is intended to allow identification of emerging risk, in part, to determine any future change to lending policy, underwriting practices or broader lending strategy prior to any indication of performance deterioration. The commercial real estate loan segment includes the non-owner occupied commercial real estate loan classes of retail, multi-family, and other.
AGENCY ​ MUNICIPAL ​ OTHER ​ SECURITIES ​ MATURITY Within 1 year ​ — % 2.65 % 0.80 % — % ​ 1.12 % After 1 year but within 5 years ​ — ​ 3.34 ​ 4.07 ​ 2.82 ​ ​ 3.47 ​ After 5 years but within 10 years ​ 2.01 ​ 3.03 ​ 6.39 ​ 3.40 ​ ​ 3.01 ​ Over 10 years ​ — ​ 3.04 ​ 6.61 ​ 3.14 ​ ​ 3.29 ​ Total ​ 2.01 ​ 3.11 ​ 3.63 ​ 3.13 ​ ​ 3.13 ​ ​ DEPOSITS The Bank believes it has a stable core deposit base made up of traditional commercial bank products that exhibit modest fluctuation during the year, other than jumbo certificates of deposits (CDs) and certain municipal deposits, which demonstrate some seasonality.
AGENCY ​ MUNICIPAL ​ OTHER ​ SECURITIES ​ MATURITY Within 1 year ​ — % 3.58 % 1.16 % 2.82 % ​ 2.59 % After 1 year but within 5 years ​ — ​ 3.37 ​ 4.21 ​ — ​ ​ 3.48 ​ After 5 years but within 10 years ​ 2.01 ​ 2.84 ​ 7.36 ​ 3.86 ​ ​ 2.91 ​ Over 10 years ​ — ​ 2.82 ​ 7.44 ​ 3.87 ​ ​ 3.96 ​ Total ​ 2.01 ​ 3.08 ​ 4.58 ​ 3.83 ​ ​ 3.43 ​ ​ DEPOSITS The Bank believes it has a stable core deposit base made up of traditional commercial bank products that exhibit modest fluctuation during the year, other than jumbo certificates of deposit and certain municipal deposits, which demonstrate some seasonality.
Mortgages sold in the secondary market are sold to investors on a “flow” basis; mortgages are priced and delivered on a “best efforts” pricing basis, with servicing released to the investor. Fannie Mae/Freddie Mac guidelines are used in underwriting all mortgages with the exception of a limited amount of CRA loans and internal special programs.
Mortgages sold in the secondary market are sold to investors on a “flow” basis; mortgages are priced and delivered on a “best efforts” pricing basis, with servicing released to the investor.
The investment portfolio of the Company and its subsidiaries are proactively managed, including in accordance with federal and state laws and regulations and in accordance with generally accepted accounting principles (GAAP). All holdings must meet standards documented in its investment policy, unless otherwise approved by the Company’s CEO or the Asset/Liability Management Committee.
The investment portfolio of the Company and its subsidiaries are proactively managed, including in accordance with federal and state laws and regulations and in accordance with generally accepted accounting principles (GAAP).
The following table sets forth the average balance of the Company’s deposits and average rates paid thereon for the past two calendar years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ AT DECEMBER 31, ​ ​ 2022 2021 ​ ​ (IN THOUSANDS, EXCEPT PERCENTAGES) ​ Demand: ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest bearing ​ $ 215,196 — % $ 211,557 — % Interest bearing ​ 227,838 0.53 ​ 213,736 0.12 ​ Savings ​ 137,845 0.10 ​ 126,050 0.14 ​ Money market ​ 289,674 0.69 ​ 297,844 0.23 ​ Certificates of deposit ​ 285,760 1.08 ​ 305,251 1.22 ​ Total deposits ​ $ 1,156,313 0.68 % $ 1,154,438 0.51 % ​ The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that protects bank depositors against loss.
The Company does not use brokered deposits as a funding source. 7 Table of Contents The following table sets forth the average balance of the Company’s deposits and average rates paid thereon for the past two calendar years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 ​ ​ (IN THOUSANDS, EXCEPT PERCENTAGES) ​ Demand: ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-interest bearing ​ $ 191,580 — % $ 215,196 — % Interest bearing ​ 225,713 1.80 ​ 227,838 0.53 ​ Savings ​ 127,539 0.10 ​ 137,845 0.10 ​ Money market ​ 302,964 2.46 ​ 289,674 0.69 ​ Time deposits (1) ​ 306,044 3.06 ​ 285,760 1.08 ​ Total deposits ​ $ 1,153,840 2.18 % $ 1,156,313 0.68 % (1) Time deposits include certificates of deposit (CDs) and individual retirement accounts (IRAs). ​ The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that protects bank depositors against loss.
The Company functions primarily as a coordinating and servicing unit for its subsidiary entities in general management, accounting and taxes, loan review, auditing, investment accounting, marketing and risk management. As a bank holding company, the Company is subject to supervision and regular examination by the Federal Reserve Bank of Philadelphia and the Pennsylvania Department of Banking and Securities (PDB).
As a bank holding company, the Company is subject to supervision and regular examination by the Federal Reserve Bank of Philadelphia and the Pennsylvania Department of Banking and Securities (PDB).
In addition to economic risk, this category is impacted by the strength of the borrower’s management, industry risk and portfolio concentration risk each of which are also monitored and considered during the underwriting process. 4 Table of Contents The commercial loan segment also includes Paycheck Protection Program (PPP) loans.
Personal guarantees are frequently required; however, as the financial strength of the borrower increases, the Bank’s ability to obtain personal guarantees decreases. In addition to economic risk, this category is impacted by the strength of the borrower’s management, industry risk and portfolio concentration risk each of which are also monitored and considered during the underwriting process.
Wealth management includes personal trust products and services such as personal portfolio investment management, estate planning and administration, custodial services and pre-need trusts. Also, institutional trust products and services such as 401(k) plans, defined benefit and defined contribution employee benefit plans, and individual retirement accounts are included in this segment.
Also, institutional trust products and services such as 401(k) plans, defined benefit and defined contribution employee benefit plans, and individual retirement accounts are included in this segment. This segment also includes financial services, which provide the sale of mutual funds, annuities, and insurance products.
Mortgages with longer terms, such as 30-year, FHA, and VA loans, are usually sold. The remaining production of the department includes construction, adjustable rate mortgages, and quality non-salable loans. These loans are usually kept in the Bank’s portfolio.
As previously stated above, Fannie Mae/Freddie Mac guidelines are used in underwriting all mortgages with the exception of a limited amount of Community Reinvestment Act (CRA) loans and internal special programs. Mortgages with longer terms, such as 30-year, FHA, and VA loans, are usually sold. The remaining production of the department includes construction, adjustable rate mortgages, and quality non-salable loans.
It should be noted that approximately 50% of these uninsured deposits relate to public funds from municipalities, government entities, and 6 Table of Contents school districts which by law are required to be collateralized with investment securities or FHLB letters of credit to protect these depositor funds. ​ The maturities on CDs with balances that exceed the FDIC insurance limit of $250,000 as of December 31, 2022, are as follows: ​ ​ ​ ​ ​ ​ (IN THOUSANDS) MATURING IN: ​ Three months or less ​ $ 18,608 Over three through six months ​ 10,049 Over six through twelve months ​ 20,994 Over twelve months ​ 24,323 Total ​ $ 73,974 ​ LOANS Secondary Market Activities The residential lending department of the Bank continues to originate one-to-four family mortgage loans for customers, some of which are sold to outside investors in the secondary market and some of which are retained for the Bank’s portfolio.
It should be noted that approximately 50% of these uninsured deposits relate to public funds from municipalities, government entities, and school districts which by law are required to be collateralized with investment securities or FHLB letters of credit to protect these depositor funds. ​ The maturities on CDs with balances that exceed the FDIC insurance limit of $250,000 as of December 31, 2023, are as follows: ​ ​ ​ ​ ​ ​ (IN THOUSANDS) MATURING IN: ​ Three months or less ​ $ 27,194 Over three through six months ​ 13,655 Over six through twelve months ​ 36,248 Over twelve months ​ 4,734 Total ​ $ 81,831 ​ AMERISERV TRUST AND FINANCIAL SERVICES COMPANY AmeriServ Trust and Financial Services Company is a trust company organized under Pennsylvania law in October 1992.
This segment also includes financial services, which provide the sale of mutual funds, annuities, and insurance products. The wealth management business also includes the union collective investment funds, the ERECT funds, which are designed to use union pension dollars in construction projects that utilize union labor.
The wealth management business also includes the union collective investment funds, the ERECT funds, which are designed to use union pension dollars in construction projects that utilize union labor. At December 31, 2023, the Trust Company had total assets of $6.4 million and total shareholders’ equity of $6.1 million.
The city also hosts annual events such as the Flood City Music Festival and the Thunder in the Valley Motorcycle Rally, each of which draw several thousand visitors. The Johnstown, PA MSA unemployment rate decreased from a 7.0% average in 2021 to a 5.1% average in 2022.
The city also hosts annual events such as the Flood City Music Festival that draws several thousand visitors. The Johnstown, PA MSA unemployment rate decreased from a 5.1% average in 2022 to a 4.4% average in 2023. The Johnstown, PA MSA continues to have one of the highest jobless rates among the 18 metropolitan statistical areas across the state.
A large percentage of the population in State College falls into the 18 to 34-year-old age group, while potential customers in the Cambria/Somerset markets tend to be over 50 years of age.
A large percentage of the population in State College falls into the 18 to 34-year-old age group, while potential customers in the Cambria/Somerset markets tend to be over 50 years of age. 9 Table of Contents Hagerstown in Washington County, Maryland offers a rare combination of business advantages providing a major crossroads location that is convenient to the entire East Coast at the intersection of I-81 and I-70.
AGENCY ​ MUNICIPAL ​ BONDS ​ SECURITIES ​ FOR SALE Within 1 year ​ — % 1.58 % 5.50 % — % ​ 4.92 % After 1 year but within 5 years ​ 3.27 ​ 3.03 ​ 5.54 ​ 2.94 ​ ​ 4.53 ​ After 5 years but within 10 years ​ 1.78 ​ 2.52 ​ 6.20 ​ 2.63 ​ ​ 4.78 ​ Over 10 years ​ 2.69 ​ — ​ 4.20 ​ 2.69 ​ ​ 2.70 ​ Total ​ 2.44 ​ 2.78 ​ 5.84 ​ 2.69 ​ ​ 3.70 ​ ​ ​ Investment securities held to maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ AT DECEMBER 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL ​ ​ ​ ​ ​ ​ ​ U.S.
AGENCY ​ MUNICIPAL ​ BONDS ​ SECURITIES ​ FOR SALE Within 1 year ​ 5.20 % 2.71 % 5.16 % — % ​ 4.48 % After 1 year but within 5 years ​ 2.69 ​ 3.01 ​ 5.95 ​ 2.83 ​ ​ 5.41 ​ After 5 years but within 10 years ​ 1.67 ​ 2.41 ​ 7.18 ​ 2.81 ​ ​ 5.50 ​ Over 10 years ​ 2.69 ​ — ​ 4.31 ​ 3.09 ​ ​ 3.09 ​ Total ​ 2.22 ​ 2.71 ​ 6.40 ​ 3.07 ​ ​ 4.13 ​ ​ ​ Investment securities held to maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ AT DECEMBER 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL ​ ​ ​ ​ ​ ​ ​ U.S.
The Bank does not engage, and has never engaged, in subprime residential mortgage lending. Consumer Loans This category includes consumer installment loans and revolving credit plans. Underwriting is pursuant to industry norms and guidelines. The major risk in this category is a significant economic downturn.
These loans are usually kept in the Bank’s portfolio. Consumer Loans This category includes consumer installment loans and revolving credit plans. A meaningful portion of this portfolio consists of home equity loans secured by residential real estate. Underwriting is pursuant to industry norms and guidelines. The major risk in this category is a significant economic downturn.
AMERISERV TRUST AND FINANCIAL SERVICES COMPANY AmeriServ Trust and Financial Services Company is a trust company organized under Pennsylvania law in October 1992. Its staff of approximately 45 professionals administers assets valued at approximately $2.3 billion that are not recognized on the Company’s balance sheet at December 31, 2022. The Trust Company focuses on wealth management.
Its staff of approximately 44 professionals administers assets valued at approximately $2.5 billion that are not recognized on the Company’s balance sheet at December 31, 2023. The Trust Company focuses on wealth management. Wealth management includes personal trust products and services such as personal investment portfolio management, estate planning and administration, custodial services and pre-need trusts.
The Company’s investment policy and hedging policy seeks to limit the amount of credit risk that may be assumed in the investment portfolio and through hedging activities. The following summarizes and describes the Company’s various loan categories and the underwriting standards applied to each: Commercial Loans This category includes credit extensions to commercial and industrial borrowers.
The Company’s investment policy and hedging policy seeks to limit the amount of credit risk that may be assumed in the investment portfolio and through hedging activities. A significant portion of the Company's loan portfolio consists of commercial real estate loans, including owner occupied properties, non-owner-occupied properties, and other commercial properties.
At December 31, 2022, the Trust Company had total assets of $6.7 million and total stockholder’s equity of $6.5 million. In 2022, the Trust Company contributed earnings to the Company as its gross revenue amounted to $10.6 million and the net income contribution was $1.3 million.
In 2023, the Trust Company contributed earnings to the Company as its gross revenue amounted to $10.4 million and the net income contribution was $1.1 million. The Trust Company is subject to regulation and supervision by the Federal Reserve Bank of Philadelphia and the PDB.
At December 31, 2022, the Company had, on a consolidated basis, total assets, deposits, and shareholders’ equity of $1.4 billion, $1.1 billion, and $106.2 million, respectively. The Company and its subsidiaries derive substantially all of their income from banking, bank related services, and trust and wealth management related services.
The Company’s principal activities consist of owning and operating its two wholly owned subsidiary entities. At December 31, 2023, the Company had, on a consolidated basis, total assets, deposits, and shareholders’ equity of $1.4 billion, $1.2 billion, and $102.3 million, respectively.
Investment securities classified as held to maturity are carried at amortized cost while investment securities classified as available for sale are reported at fair market value. 5 Table of Contents The following table sets forth the weighted average yield for each type of investment security and range of maturity as of December 31, 2022.
See Note 1 within the Notes to Consolidated Financial Statements for information regarding the Company’s calculation of the allowance for credit losses on both the held to maturity and available for sale investment securities portfolios. The following table sets forth the weighted average yield for each type of investment security and range of maturity as of December 31, 2023.
The investment portfolio is primarily made up of AAA rated agency mortgage-backed securities, high quality corporate securities, taxable municipal securities, and agency securities. Management strives to maintain a portfolio duration that is less than 60 months.
Management strives to maintain a portfolio duration that is less than 60 months.
In addition, some of these competitors, such as credit unions, are subject to a lesser degree of regulation or taxation than that imposed on us. MARKET AREA & ECONOMY U.S. inflation surged with in 2022, reaching heights unseen since the early 1980s. Increasing prices shrank Americans’ inflation-adjusted pay despite high wage growth for many.
In addition, some of these competitors, such as credit unions, are subject to a lesser degree of regulation or taxation than that imposed on us. MARKET AREA & ECONOMY After a year of the most aggressive Fed tightening in four decades in 2022, most economists, including the Federal Reserve staff, expected a recession when 2023 began.
Since inception of the partnership, the Bank has funded approximately $280 million in mortgage and consumer loans to unionized teachers and their family members. INDUSTRY REGULATION The banking and trust industry, and the operation of bank holding companies, is highly regulated by federal and state law, and by numerous regulations adopted by the federal and state banking agencies.
The Company is focused on sourcing and hiring with fair and equitable approaches, creating an environment where all employees can develop and thrive. INDUSTRY REGULATION The banking and trust industry, and the operation of bank holding companies, is highly regulated by federal and state law, and by numerous regulations adopted by the federal and state banking agencies.
Removed
The Company’s other wholly owned subsidiary is AmeriServ Trust and Financial Services Company (the Trust Company) which was formed in October 1992. AmeriServ Life Insurance Company (AmeriServ Life), formed in October 1987, was a captive insurance company that engaged in underwriting as a reinsurer of credit life and disability insurance. New business ceased being generated by AmeriServ Life in 2005.
Added
The Company and its subsidiaries derive substantially all of their income from banking, bank related services, and trust and wealth management related services. The Company functions primarily as a coordinating and servicing unit for its subsidiary entities in general management, accounting and taxes, loan review, internal audit, investment accounting, marketing and risk management.
Removed
Since that time, the outstanding insurance policies have been running off and the final policy has expired. On September 30, 2020, the Arizona Corporation Commission approved the Articles of Dissolution for AmeriServ Life. The remaining assets of AmeriServ Life were transferred to AmeriServ Financial, Inc. and the subsidiary was formally closed on December 31, 2020.
Added
These types of loans are generally viewed as having more risk of default than residential real estate loans and depend on cash flows from the owner’s business or the property’s tenants to service the debt.
Removed
The Company seeks to identify, manage and monitor these risks with policies, procedures, and various levels of oversight from the Company’s Board of Directors (the Board) and management.
Added
The borrower’s cash flows may be affected significantly by general economic conditions, a downturn in the local economy or in occupancy rates in the market where the property is located, any of which could increase the likelihood of default.
Removed
Personal guarantees are frequently required; however, as the financial strength of the borrower increases, the Bank’s ability to obtain personal guarantees decreases.
Added
Commercial real estate loans also typically have larger loan balances, and, therefore, the deterioration of one or a few of these loans could cause a significant increase in the percentage of the Company's non-performing loans.
Removed
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) authorized the Small Business Administration (SBA) to guarantee 100% of the PPP loans made to eligible borrowers pursuant to standards as defined by the SBA. The SBA guarantee on PPP loans minimizes the level of credit risk associated with the loans.
Added
An increase in non-performing loans could result in a loss of earnings from these loans, an increase in the provision for credit losses for loans, and an increase in charge-offs, all of which could have a material adverse effect on the Company's business, financial condition, and results of operations. ​ The banking regulatory agencies have recently expressed concerns about weaknesses in the current commercial real estate market.
Removed
As a result, such loans are assigned a 0% risk weight for purposes of calculating the Company’s risk-based capital ratios. Therefore, it was deemed appropriate to not allocate any portion of the loan loss reserve for the PPP loans. As of December 31, 2022, the Company had 1 PPP loan outstanding totaling $22,000.
Added
Banking regulators generally give commercial real estate lending greater scrutiny and may require banks with higher levels of commercial real estate loans to implement enhanced risk management practices, including stricter underwriting, internal controls, risk management policies, more granular reporting, and portfolio stress testing, as well as possibly higher levels of allowances for credit losses and capital levels as a result of commercial real estate lending 4 Table of Contents growth and exposures.
Removed
Among the instruments of monetary policy used by the Federal Reserve are: open market operations in U.S. Government securities, changes in the federal funds rate and discount rate on member bank borrowings, and changes in reserve requirements on bank deposits.
Added
If the Company's banking regulators determine that our commercial real estate lending activities are particularly risky and are subject to such heightened scrutiny, the Company may incur significant additional costs or be required to restrict certain of our commercial real estate lending activities.
Removed
Pandemic price pressures, dismissed as transitory, turned out to be enduring and the Russia / Ukraine war caused a fresh spike in food and energy costs. A surge in demand coming out of the COVID-19 recession, coupled with lingering supply-chain disruptions and labor shortages, created a perfect storm for price increases.
Added
Furthermore, failures in the Company's risk management policies, procedures and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which could have a material adverse effect on the Company's business, financial condition, and results of operations. ​ The following summarizes and describes the Company’s various loan categories and the underwriting standards applied to each: Commercial Loans This category includes credit extensions to commercial and industrial borrowers.
Removed
The Fed increased interest rates aggressively at the risk of plunging the world’s largest economy into recession. Positive second half 2022 GDP growth tempered recessionary fears, though 2023 concerns continue to exist. Interest rate-sensitive sectors like autos and housing were impacted the most by the Fed tightening, but pent-up demand and pandemic savings kept spending elevated.
Added
At December 31, 2023, the Bank’s non-owner occupied commercial real estate loan concentration stood at 375% of total regulatory capital. It should be noted that this ratio increased from 350% at December 31, 2022 due to growth in non-owner occupied commercial real estate loan balances as well as a slight decrease in total regulatory capital between years.
Removed
The labor market remains historically tight, showing strong wage pressures and solid job growth despite 425 basis points of Fed tightening. Job growth slowed somewhat over the course of 2022, but with the 12-month average around 400k it is nearly double the pre-pandemic average.
Added
Further, non-owner occupied commercial real estate loans represented 49.3% and 45.5% of total loans as of December 31, 2023 and 2022, respectively. 5 Table of Contents The following table presents our non-owner occupied commercial real estate loan portfolio by property type. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ DECEMBER 31, 2023 ​ ​ COMMERCIAL ​ COMMERCIAL ​ ​ ​ ​ ​ ​ ​ REAL ESTATE ​ REAL ESTATE ​ OTHER COMMERCIAL ​ ​ ​ ​ ​ (NON-OWNER OCCUPIED) - ​ (NON-OWNER OCCUPIED) - ​ REAL ESTATE ​ ​ ​ ​ RETAIL MULTI-FAMILY (NON-OWNER OCCUPIED) TOTAL ​ ​ (IN THOUSANDS) 1-4 unit residential ​ $ — ​ $ — ​ $ 27,038 ​ $ 27,038 Multi-family ​ — ​ 92,037 ​ — ​ 92,037 Mixed use - apartments & retail/office ​ ​ — ​ ​ 17,971 ​ ​ — ​ ​ 17,971 Retail strip plaza ​ ​ 45,691 ​ ​ — ​ ​ — ​ ​ 45,691 Mall ​ ​ 3,995 ​ ​ — ​ ​ — ​ ​ 3,995 Major shopping center with anchor tenants ​ ​ 29,471 ​ ​ — ​ ​ — ​ ​ 29,471 Commercial office - urban ​ ​ — ​ ​ — ​ ​ 13,734 ​ ​ 13,734 Commercial office - suburban ​ ​ — ​ ​ — ​ ​ 9,404 ​ ​ 9,404 Mixed use - retail/office ​ ​ — ​ ​ — ​ ​ 34,144 ​ ​ 34,144 Hotel/motel ​ — ​ — ​ 43,546 ​ 43,546 Retail/service shops ​ 82,804 ​ — ​ — ​ 82,804 Personal care/hospital/medical office ​ — ​ — ​ 20,291 ​ 20,291 Manufacturing/warehouse ​ — ​ — ​ 85,981 ​ 85,981 Other ​ — ​ — ​ 68 ​ 68 Land acquisition and development ​ — ​ — ​ 6,080 ​ 6,080 Total ​ $ 161,961 ​ $ 110,008 ​ $ 240,286 ​ $ 512,255 ​ Residential Mortgages This category includes mortgages that are secured by residential property.
Removed
The Fed is looking for much slower job growth as it aims to rebalance labor supply and demand in its mission to cool wage pressures. Supply chain improvements have cooled some producer price inflation. Rising mortgage rates and elevated house prices have pulled sales down from their pandemic peaks.
Added
The Bank does not engage, and has never engaged, in subprime residential mortgage lending. Secondary Market Activities The residential lending department of the Bank continues to originate one-to-four family mortgage loans for customers, some of which are sold to outside investors in the secondary market and some of which are retained for the Bank’s portfolio.
Removed
Johnstown, Pennsylvania, where the Company is headquartered, continues to have a cost of living that is lower than the national average. Johnstown is home to The University of Pittsburgh at Johnstown, Pennsylvania Highlands Community College and Conemaugh Health System.
Added
All holdings must meet standards documented in its investment policy, unless otherwise approved by the Company’s CEO or the Asset/Liability Management Committee. 6 Table of Contents The investment portfolio is primarily made up of AAA rated agency mortgage-backed securities, high quality corporate securities, taxable municipal securities, and agency securities.
Removed
The Johnstown, PA MSA continues to have one of the highest jobless rates among the 18 metropolitan statistical areas across the state.
Added
Investment securities classified as held to maturity are carried at amortized cost while investment securities classified as available for sale are reported at fair market value with unrealized aggregate appreciation/depreciation excluded from income and credited/charged to accumulated other comprehensive income (loss) within shareholders’ equity on a net of tax basis.
Removed
As of December 31, 2022, employment within the Johnstown MSA has not yet recovered to pre-pandemic levels as there were 83,600 persons employed compared to 88,400 employed at December 31, 2019 representing a decline of 4,800 jobs, or 5.4%. This economic data, coupled with a declining population trend, creates a growth challenge moving forward.
Added
The Company measures current expected credit losses on debt securities in accordance with ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments .

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSeven additional locations are leased with terms expiring from September 30, 2023 to June 30, 2033. ​
Biggest changeSeven additional locations are leased with terms expiring from April 30, 2025 to June 30, 2033. ​ 15 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS The Company is subject to a number of asserted and unasserted potential legal claims encountered in the normal course of business.
Biggest changeITEM 3. LEGAL PROCEEDINGS The Company is subject to various types of lawsuits and claims arising in the ordinary course of business.
Removed
In the opinion of both management and legal counsel, there is no present basis to conclude that the resolution of these claims will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. ​ ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ​ ​ 12 Table of Contents PART II
Added
In the opinion of management, after review and consultation with counsel, there are no material legal proceedings currently pending to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.
Added
As discussed further in the Non-Interest Expense section of Item 7, Management’s Discussion and Analysis of Consolidated Financial Position and Results of Operations, during 2023, the Company incurred certain non-interest expenses due to increased legal and professional fees resulting from the activities of an activist investor and a proxy contest relating to the Company’s 2023 annual meeting of shareholders, some of which expenses involved lawsuits brought by the activist investor in connection with the Company’s 2023 annual meeting of shareholders. ​ ITEM 4.
Added
MINE SAFETY DISCLOSURES Not applicable. ​ ​ 16 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe Company’s common stock is traded on The NASDAQ Stock Market under the symbol “ASRV.” The following table sets forth the actual high and low closing prices and the cash dividends declared per share for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH ​ ​ PRICES ​ DIVIDENDS ​ HIGH LOW DECLARED Year ended December 31, 2022: ​ ​ ​ ​ ​ ​ First Quarter ​ $ 4.50 ​ $ 3.85 ​ $ 0.025 Second Quarter ​ 4.08 ​ 3.92 ​ 0.030 Third Quarter ​ 4.03 ​ 3.80 ​ 0.030 Fourth Quarter ​ 4.10 ​ 3.70 ​ 0.030 Year ended December 31, 2021: ​ ​ ​ First Quarter ​ $ 4.39 ​ $ 3.09 ​ $ 0.025 Second Quarter ​ 4.31 ​ 3.77 ​ 0.025 Third Quarter ​ 4.00 ​ 3.70 ​ 0.025 Fourth Quarter ​ 4.01 ​ 3.74 ​ 0.025 ​ The declaration of cash dividends on the Company’s common stock is at the discretion of the Board, and any decision to declare a dividend is based on a number of factors, including, but not limited to, earnings, prospects, financial condition, regulatory capital levels, applicable covenants under any credit agreements and other contractual restrictions, Pennsylvania law, federal and Pennsylvania bank regulatory law, and other factors deemed relevant.
Biggest changeThe Company’s common stock is traded on The NASDAQ Stock Market under the symbol “ASRV.” The following table sets forth the actual high and low closing prices and the cash dividends declared per share for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH ​ ​ PRICES ​ DIVIDENDS ​ HIGH LOW DECLARED Year ended December 31, 2023: ​ ​ ​ ​ ​ ​ First Quarter ​ $ 4.09 ​ $ 3.05 ​ $ 0.030 Second Quarter ​ 3.28 ​ 2.46 ​ 0.030 Third Quarter ​ 3.33 ​ 2.41 ​ 0.030 Fourth Quarter ​ 3.28 ​ 2.51 ​ 0.030 Year ended December 31, 2022: ​ ​ ​ First Quarter ​ $ 4.50 ​ $ 3.85 ​ $ 0.025 Second Quarter ​ 4.08 ​ 3.92 ​ 0.030 Third Quarter ​ 4.03 ​ 3.80 ​ 0.030 Fourth Quarter ​ 4.10 ​ 3.70 ​ 0.030 ​ The declaration of cash dividends on the Company’s common stock is at the discretion of the Board, and any decision to declare a dividend is based on a number of factors, including, but not limited to, earnings, prospects, financial condition, regulatory capital levels, applicable covenants under any credit agreements and other contractual restrictions, Pennsylvania law, federal and Pennsylvania bank regulatory law, and other factors deemed relevant.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES COMMON STOCK As of March 21, 2023, the Company had 2,560 shareholders of record for its common stock.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES COMMON STOCK As of March 20, 2024, the Company had 2,489 shareholders of record for its common stock.
Removed
Additionally, the Company’s previously announced common stock repurchase programs have been completed. ​ ​ 13 Table of Contents
Added
Additionally, the Company does not currently have a common stock repurchase program authorized. ​ ITEM 6. [RESERVED] ​ ​ 17 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table sets forth changes in the ALL and certain ratios for the periods ended. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED DECEMBER 31, ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ (IN THOUSANDS, EXCEPT RATIOS AND PERCENTAGES) ​ Loans and loans held for sale, net of unearned income: ​ ​ ​ ​ Average for the year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 225,487 ​ $ 275,795 ​ $ 294,630 ​ Commercial loans secured by non-owner occupied real estate ​ ​ 443,406 ​ ​ 424,765 ​ ​ 378,781 ​ Real estate – residential mortgage ​ ​ 295,528 ​ ​ 274,016 ​ ​ 242,823 ​ Consumer ​ ​ 14,218 ​ ​ 15,796 ​ ​ 17,131 ​ Total loans and loans held for sale, net of unearned income ​ ​ 977,541 ​ ​ 988,761 ​ ​ 923,269 ​ At December 31, ​ 990,825 ​ 986,037 ​ 978,345 ​ As a percent of average loans: ​ ​ ​ ​ Net charge-offs (recoveries): ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ ​ 0.04 % 0.02 % 0.04 % Commercial loans secured by non-owner occupied real estate ​ ​ 0.30 ​ ​ (0.01) ​ ​ (0.01) ​ Real estate – residential mortgage ​ ​ — ​ ​ (0.01) ​ ​ 0.07 ​ Consumer ​ ​ 1.88 ​ ​ 0.46 ​ ​ 0.44 ​ Total loans and loans held for sale, net of unearned income ​ ​ 0.17 ​ ​ — ​ ​ 0.03 ​ Provision (credit) for loan losses ​ 0.01 ​ 0.11 ​ 0.26 ​ Allowance, as a percent of each of the following: ​ ​ ​ ​ Total loans, net of unearned income ​ 1.08 ​ 1.26 ​ 1.16 ​ Total accruing delinquent loans (past due 30 to 89 days) ​ 170.63 ​ 195.68 ​ 206.12 ​ Total non-accrual loans ​ 208.16 ​ 373.10 ​ 453.80 ​ Total non-performing assets ​ 206.60 ​ 373.10 ​ 340.59 ​ Allowance, as a multiple of net charge-offs ​ 6.30x ​ 263.79x ​ 36.72x ​ Non-accrual loans, as a percentage of total loans, net of unearned income ​ 0.52 % 0.34 % 0.26 % ​ For 2022, the Company recorded a $50,000 provision expense for loan losses compared to a $1.1 million provision expense in 2021.
Biggest changeIn summary, the allowance for loan losses provided 207% coverage of non-performing assets, and 1.08% of total loans, on December 31, 2022, compared to 373% coverage of non-performing assets, and 1.26% of total loans, on December 31, 2021. 27 Table of Contents The following table sets forth changes specific to the allowance for credit losses on the loan portfolio and certain ratios for the periods ended. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED DECEMBER 31, ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ (IN THOUSANDS, EXCEPT RATIOS AND PERCENTAGES) ​ Loans and loans held for sale, net of unearned income: ​ ​ ​ ​ Average for the year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate (owner occupied) ​ $ 85,590 ​ $ — ​ $ — ​ Other commercial and industrial ​ ​ 151,378 ​ ​ — ​ ​ — ​ Commercial (owner occupied real estate and other) ​ ​ — ​ ​ 225,487 ​ ​ 275,795 ​ Commercial real estate (non-owner occupied) - retail ​ ​ 157,054 ​ ​ — ​ ​ — ​ Commercial real estate (non-owner occupied) - multi-family ​ ​ 103,468 ​ ​ — ​ ​ — ​ Other commercial real estate (non-owner occupied) ​ ​ 228,314 ​ ​ 443,406 ​ ​ 424,765 ​ Residential mortgages ​ ​ 175,299 ​ ​ 295,528 ​ ​ 274,016 ​ Consumer ​ ​ 101,350 ​ ​ 14,218 ​ ​ 15,796 ​ Total loans and loans held for sale, net of unearned income ​ ​ 997,204 ​ ​ 977,541 ​ ​ 988,761 ​ At December 31, ​ 1,038,401 ​ 990,825 ​ 986,037 ​ As a percent of average loans: ​ ​ ​ ​ Net charge-offs (recoveries): ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate (owner occupied) ​ ​ (0.03) % ​ — % ​ — % Other commercial and industrial ​ ​ 0.32 ​ ​ — ​ ​ — ​ Commercial (owner occupied real estate and other) ​ ​ — ​ 0.04 ​ 0.02 ​ Commercial real estate (non-owner occupied) - retail ​ ​ 1.29 ​ ​ — ​ ​ — ​ Commercial real estate (non-owner occupied) - multi-family ​ ​ (0.01) ​ ​ — ​ ​ — ​ Other commercial real estate (non-owner occupied) ​ ​ 0.35 ​ ​ 0.30 ​ ​ (0.01) ​ Residential mortgages ​ ​ 0.02 ​ ​ — ​ ​ (0.01) ​ Consumer ​ ​ 0.15 ​ ​ 1.88 ​ ​ 0.46 ​ Total loans and loans held for sale, net of unearned income ​ ​ 0.35 ​ ​ 0.17 ​ ​ — ​ Provision for credit losses ​ 0.66 ​ 0.01 ​ 0.11 ​ Allowance, as a multiple of net charge-offs ​ 4.35x ​ 6.30x ​ 263.79x ​ ​ The following schedule sets forth the allocation of the allowance for credit losses among the various loan categories.
FORWARD LOOKING STATEMENTS THE STRATEGIC FOCUS: AmeriServ Financial is committed to increasing shareholder value by striving for consistently improving financial performance; providing our customers with products and exceptional service for every step in their lifetime financial journey; cultivating an employee atmosphere rooted in trust, empowerment and growth; and serving our communities through employee involvement and a philanthropic spirit.
FORWARD LOOKING STATEMENTS THE STRATEGIC FOCUS: AmeriServ Financial is committed to improving shareholder value by striving for consistently improving financial performance; providing our customers with products and exceptional service for every step in their lifetime financial journey; cultivating an employee atmosphere rooted in trust, empowerment and growth; and serving our communities through employee involvement and a philanthropic spirit.
In 2022, the Company benefitted from management’s decision to allow a high-cost, institutional deposit to mature during the third quarter of 2021 which proved to be beneficial since the interest rate on this particular deposit was indexed to the market and would have become more expensive with the rising national interest rates experienced this year.
In 2022, the Company benefitted from management’s decision to allow a high-cost, institutional deposit to mature during the third quarter of 2021 which proved to be beneficial since the interest rate on this particular deposit was indexed to the market and would have become more expensive with the rising national interest rates experienced in 2022.
Under the Basel III capital standards, the minimum capital ratios are: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ MINIMUM CAPITAL RATIO ​ ​ MINIMUM ​ PLUS CAPITAL ​ CAPITAL RATIO CONSERVATION BUFFER Common equity tier 1 capital to risk-weighted assets ​ 4.5 % 7.0 % Tier 1 capital to risk-weighted assets 6.0 8.5 ​ Total capital to risk-weighted assets 8.0 10.5 ​ Tier 1 capital to total average consolidated assets 4.0 ​ (1) Non-GAAP financial information, see “Reconciliation of Non-GAAP Financial Measures” later in this MD&A.
Under the Basel III capital standards, the minimum capital ratios are: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ MINIMUM CAPITAL RATIO ​ ​ MINIMUM ​ PLUS CAPITAL ​ CAPITAL RATIO CONSERVATION BUFFER Common equity tier 1 capital to risk-weighted assets ​ 4.5 % 7.0 % Tier 1 capital to risk-weighted assets 6.0 8.5 ​ Total capital to risk-weighted assets 8.0 10.5 ​ Tier 1 capital to total average consolidated assets 4.0 N/A ​ (1) Non-GAAP financial information, see “Reconciliation of Non-GAAP Financial Measures” later in this MD&A.
The rising national interest rates resulted in certain deposit products, particularly public funds, that are tied to a market index, repricing upward with the move in national interest rates and causing interest expense to increase.
The rising national interest rates in 2022 resulted in certain deposit products, particularly public funds, that are tied to a market index, repricing upward with the move in national interest rates and causing interest expense to increase.
The reduced level of mortgage loan production also caused mortgage related fees to decline by $243,000, or 67.9%; ● a $366,000, or 3.1%, decline in wealth management fees due to the unfavorable impact of the declining equity markets as well as the unfavorable impact that the move in the bond market is having on wealth management asset values, both of which were partially offset by new customer business growth.
The reduced level of mortgage loan production also caused mortgage related fees to decline by $243,000, or 67.9%; ● a $366,000, or 3.1%, decline in wealth management fees due to the unfavorable impact of the declining equity markets as well as the unfavorable impact that the move in the bond market was having on wealth management asset values, both of which were partially offset by new customer business growth.
We will explore branch consolidation opportunities and further leverage union affiliated revenue streams, prudently manage the Company’s risk profile to improve asset yields and increase profitability and continue to identify and implement technological opportunities and advancements to drive efficiency for the holding company and its affiliates. 37 Table of Contents ● Customers — The Company expects to provide exceptional customer service, identifying opportunities to enhance the Banking for Life philosophy by providing products and services to meet the financial needs in every step through a customer’s life cycle, and further defining the role technology plays in anticipating and satisfying customer needs.
We explore branch consolidation opportunities and further leverage union affiliated revenue streams, prudently manage the Company’s risk profile to improve asset yields and increase profitability and continue to identify and implement technological opportunities and advancements to drive efficiency for the holding company and its affiliates. 40 Table of Contents ● Customers — The Company expects to provide exceptional customer service, identifying opportunities to enhance the Banking for Life philosophy by providing products and services to meet the financial needs in every step through a customer’s life cycle, and further defining the role technology plays in anticipating and satisfying customer needs.
The table that follows provides an analysis of net interest income on a tax-equivalent basis (non-GAAP) setting forth (i) average assets, liabilities, and stockholders’ equity, (ii) interest income earned on interest earning assets and interest expense paid on interest bearing liabilities, (iii) average yields earned on interest earning assets and average rates paid on interest bearing liabilities, (iv) interest rate spread (the difference between the average yield earned on interest earning assets and the average rate paid on interest bearing liabilities), and (v) net interest margin (net interest income as a percentage of average total interest earning assets).
The table that follows provides an analysis of net interest income on a tax-equivalent basis (non-GAAP) setting forth (i) average assets, liabilities, and shareholders’ equity, (ii) interest income earned on interest earning assets and interest expense paid on interest bearing liabilities, (iii) average yields earned on interest earning assets and average rates paid on interest bearing liabilities, (iv) interest rate spread (the difference between the average yield earned on interest earning assets and the average rate paid on interest bearing liabilities), and (v) net interest margin (net interest income as a percentage of average total interest earning assets).
Additionally, pension expense can also be impacted by settlement accounting charges if the amount of employee selected lump sum distributions exceed the total amount of service and interest component costs of the net periodic pension cost in a particular year. Our pension benefits are described further in Note 17 of the Notes to Consolidated Financial Statements.
Additionally, pension expense can also be impacted by settlement accounting charges if the amount of employee selected lump sum distributions exceed the total amount of service and interest component costs of the net periodic pension cost in a particular year. Our pension benefits are described further in Note 16 of the Notes to Consolidated Financial Statements.
Factors contributing to this lower level of non-interest income in 2022 included: ● a $456,000, or 68.7%, decrease in net gains on loans held for sale due to the lower level of residential mortgage loan production which reflects a reduced level of mortgage loan refinance activity because of the rapid escalation of interest rates since the beginning of 2022.
Factors contributing to this lower level of non-interest income in 2022 included: ● a $456,000, or 68.7%, decrease in net gains on loans held for sale due to the lower level of residential mortgage loan production which reflected a reduced level of mortgage loan refinance activity because of the rapid escalation of interest rates since the beginning of 2022.
Partially offsetting these higher costs within salaries and benefits expense was lower incentive compensation by $808,000, or 38.2%, due to the reduced level of loan production and no performance related executive incentive payments in 2022; ● a $338,000, or 11.8%, increase in professional fees due primarily to higher legal costs within our wealth management group; ● no additional costs related to the branch acquisition were recognized in 2022 after $389,000 was recognized in 2021; 25 Table of Contents ● a $279,000, or 7.6%, increase in data processing and IT expense resulted from additional costs from our core data provider and increased costs related to monitoring our computing and network environment; ● a $263,000, or 10.0%, increase in net occupancy expense due to increased utilities cost along with maintenance and repair expense which was primarily related to the new branch office; ● other expense was favorably impacted by a $243,000 credit for the unfunded commitment reserve after $117,000 of expense was recognized last year, resulting in a $360,000 favorable shift; and ● a $140,000, or 21.4%, reduction in FDIC deposit insurance expense.
Partially offsetting these higher costs within salaries and benefits expense was lower incentive compensation by $808,000, or 38.2%, due to the reduced level of loan production and no performance related executive incentive payments in 2022; ● a $338,000, or 11.8%, increase in professional fees due primarily to higher legal costs within our wealth management group; ● no additional costs related to the branch acquisition were recognized in 2022 after $389,000 was recognized in 2021; ● a $279,000, or 7.6%, increase in data processing and IT expense resulted from additional costs from our core data provider and increased costs related to monitoring our computing and network environment; ● a $263,000, or 10.0%, increase in net occupancy expense due to increased utilities cost along with maintenance and repair expense which was primarily related to the new branch office; ● other expense was favorably impacted by a $243,000 credit for the unfunded commitment reserve after $117,000 of expense was recognized in 2021, resulting in a $360,000 favorable shift; and ● a $140,000, or 21.4%, reduction in FDIC deposit insurance expense.
Total deposits, including non-interest bearing demand deposits, averaged $1.156 billion for the full year of 2022, which was $1.9 million, or 0.2%, higher than the $1.154 billion average for the full year of 2021. The 2022 full year average of short-term and FHLB borrowed funds was $43 million, which represented a decrease of $7.2 million, or 14.5%.
Total deposits, including non-interest bearing demand deposits, averaged $1.156 billion for the full year of 2022, which was $1.9 million, or 0.2%, higher than the $1.154 billion average for the full year of 2021. The 2022 full year average of short-term and FHLB borrowed funds was $42.5 million, which represented a decrease of $7.2 million, or 14.5%.
Of the approximately $100 million of PPP loans originated from the government stimulus programs, only one very small PPP loan remains on the balance sheet, reflecting the Company’s successful efforts working with our customers through the Small Business Administration (SBA) to complete the forgiveness process.
Of the approximately $100 million of PPP loans originated from the government stimulus programs, only one very small PPP loan remained on the balance sheet, reflecting the Company’s successful efforts working with our customers through the Small Business Administration (SBA) to complete the forgiveness process.
The higher level of net charge-offs in 2022 is primarily related to the partial charge-down and transfer of one non-owner occupied commercial real estate loan relationship into non-accrual status while the borrower pursues the sale of the property.
The higher level of net charge-offs in 2022 is primarily related to the partial charge-down and transfer of one non-owner occupied commercial real estate loan relationship into non-accrual status while the borrower pursued the sale of the property.
This results from the favorable impact of the higher volume of traditional loans and the higher interest rate environment being partially offset by a $1.8 million, or 80.9%, reduction in PPP loan fee related income.
This resulted from the favorable impact of the higher volume of traditional loans and the higher interest rate environment being partially offset by a $1.8 million, or 80.9%, reduction in PPP loan fee related income.
The $1,050,000 favorable comparison for total provision expense for the full year of 2022 reflects improved credit quality for the overall portfolio due to several loan upgrades and increased payoff and paydown activity of criticized loans.
The $1,050,000 favorable comparison for total provision expense for the full year of 2022 reflected improved credit quality for the overall portfolio due to several loan upgrades and increased payoff and paydown activity of criticized loans.
Finally, on an end of period basis at December 31, 2022 and excluding total PPP loans, the total loan portfolio is approximately $22.1 million, or 2.3%, higher than the December 31, 2021 level. ​ Total investment securities averaged $245.2 million for the full year of 2022 which is $35.3 million, or 16.8%, higher than the $209.9 million average for the twelve months of last year.
Finally, on an end of period basis at December 31, 2022 and excluding total PPP loans, the total loan portfolio was approximately $22.1 million, or 2.3%, higher than the December 31, 2021 level. ​ Total investment securities averaged $245.2 million for the full year of 2022 which was $35.3 million, or 16.8%, higher than the $209.9 million average for the twelve months of 2021.
However, the quarterly decrease reflects a portion of the funds from the government stimulus programs leaving the balance sheet and also reflects greater pricing competition in the market to retain deposits because of the increasing national interest rates.
However, the quarterly decrease reflected a portion of the funds from the government stimulus programs leaving the balance sheet and also reflected greater pricing competition in the market to retain deposits because of the increasing national interest rates.
Note that included in 2021 borrowings interest expense is $202,000 of additional interest expense that the Company had to recognize from the write-off of the unamortized issuance costs from the original debt instruments that the new sub-debt replaced.
Note that included in 2021 borrowings interest expense was $202,000 of additional interest expense that the Company had to recognize from the write-off of the unamortized issuance costs from the original debt instruments that the new sub-debt replaced.
The interest rate scenarios in the table compare the Company’s base forecast, which was prepared using a flat interest rate scenario, to scenarios that reflect immediate interest rate changes of 100 and 200 basis 31 Table of Contents points.
The interest rate scenarios in the table compare the Company’s base forecast, which was prepared using a flat interest rate scenario, to scenarios that reflect immediate interest rate changes of 100 and 200 basis 35 Table of Contents points.
The decrease results from the favorable impact of the August 2021 subordinated debt offering which was used to replace higher cost debt. This transaction effectively lowered debt cost on these long-term funds by nearly 4.0%. This savings is recognized even though the size of the new subordinated debt is $7.0 million higher than the debt instruments it replaced.
The decrease resulted from the favorable impact of the August 2021 subordinated debt offering which was used to replace higher cost debt. This transaction effectively lowered debt cost on these long-term funds by nearly 4.0%. This savings was recognized even though the size of the new subordinated debt was $7.0 million higher than the debt instruments it replaced.
These assumptions include discount rates, benefits earned, interest costs, expected return on plan assets, mortality rates, and other factors. In accordance with GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation of future periods.
These assumptions include discount rates, benefits earned, interest costs, expected return on plan assets, mortality rates, and other factors. In accordance with GAAP, actual results that differ from the assumptions are accumulated and amortized over future 38 Table of Contents periods and, therefore, generally affect recognized expense and the recorded obligation of future periods.
The Company’s interest rate sensitivity position shifts from being liability to an asset sensitive position over six months and beyond as more of our loans begin to reprice.
The Company’s interest rate sensitivity position shifts from being liability sensitive to an asset sensitive position over three months and beyond as more of our loans begin to reprice.
Despite the balance of total average interest earning assets remaining relatively unchanged from the prior year, total interest income increased by $2.4 million, or 5.1%, between years due to an increase in the yield on earning assets, which increased from 3.76% to 3.95%.
Despite the balance of total average interest earning assets remaining relatively unchanged from 2021, total interest income increased by $2.4 million, or 5.1%, between years due to an increase in the yield on earning assets, which increased from 3.76% to 3.95%.
The Company experienced net loan charge-offs of $1.7 million, or 0.17% of total average loans, for the 2022 year and is higher than net loan charge-offs of $47,000, which equates to 0.00% of total average loans, for the full year of 2021.
Overall, the Company experienced net loan charge-offs of $1.7 million, or 0.17% of total average loans, for the 2022 year and was higher than net loan charge-offs of $47,000, which equates to 0.00% of total average loans, for the full year of 2021.
The foregoing list of important factors is not exclusive, and neither such list nor any forward-looking statement takes into account the impact that any future acquisition may have on the Company and on any such forward-looking statement. ​ 38 Table of Contents
The foregoing list of important factors is not exclusive, and neither such list nor any forward-looking statement takes into account the impact that any future acquisition may have on the Company and on any such forward-looking statement. ​
The fair market value of wealth management assets declined since the fourth quarter of 2021 by $398.3 million, or 14.7%, and totaled $2.3 billion at December 31, 2022; 24 Table of Contents ● a $143,000, or 14.8%, increase in service charges on deposit accounts as consumers are more active this year, increasing their spending habits; and ● the Company recognized an $84,000 gain on investment securities in 2021 as compared to this year when no such gain was recognized.
The fair market value of wealth management assets declined since the fourth quarter of 2021 by $398.3 million, or 14.7%, and totaled $2.3 billion at December 31, 2022; ● a $143,000, or 14.8%, increase in service charges on deposit accounts as consumers were more active in 2022, increasing their spending habits; and ● the Company recognized an $84,000 gain on investment securities in 2021 as compared to 2022 when no such gain was recognized.
The tax equivalent adjustments to interest income on loans and municipal securities for the years ended December 31, 2022, 2021, and 2020 was 13,000, 18,000, and 24,000, respectively, which is reconciled to the corresponding GAAP measure at the bottom of the table.
The tax equivalent adjustments to interest income on loans and municipal securities for the years ended December 31, 2023, 2022, and 2021 was $15,000, $13,000, and $18,000, respectively, which is reconciled to the corresponding GAAP measure at the bottom of the table.
Each rate scenario contains unique prepayment and repricing assumptions that are applied to the Company’s existing balance sheet that was developed under the flat interest rate scenario. ​ ​ ​ ​ ​ ​ ​ ​ ​ VARIABILITY OF CHANGE IN ​ ​ NET INTEREST ​ MARKET VALUE OF ​ INTEREST RATE SCENARIO INCOME PORTFOLIO EQUITY ​ 200 bp increase ​ (2.3) % (3.8) % 100 bp increase (1.2) (1.1) ​ 100 bp decrease 0.7 (2.7) ​ 200 bp decrease 0.8 (10.1) ​ ​ The Company believes that its overall interest rate risk position is well controlled.
Each rate scenario contains unique prepayment and repricing assumptions that are applied to the Company’s existing balance sheet that was developed under the flat interest rate scenario. ​ ​ ​ ​ ​ ​ ​ INTEREST RATE SCENARIO VARIABILITY OF NET INTEREST INCOME CHANGE IN MARKET VALUE OF PORTFOLIO EQUITY ​ 200 bp increase ​ (1.2) % 3.2 % 100 bp increase (0.6) 2.6 ​ 100 bp decrease 0.2 (6.0) ​ 200 bp decrease (0.2) (13.9) ​ ​ The Company believes that its overall interest rate risk position is well controlled.
Liquidity needs can be met by either reducing assets or increasing liabilities. Sources of asset liquidity are provided by short-term investments, interest bearing deposits with banks, and federal funds sold. These assets totaled $23.0 million and $41.1 million at December 31, 2022 and December 31, 2021, respectively.
Liquidity needs can be met by either reducing assets or increasing liabilities. Sources of asset liquidity are provided by short-term investments, interest bearing deposits with banks, and federal funds sold. These assets totaled $14.0 million and $23.0 million at December 31, 2023 and December 31, 2022, respectively.
We will develop a value added combination for increasing revenue and controlling expenses that is rooted in developing and offering high-quality financial products and services; an existing branch network; electronic banking capabilities with 24/7 convenience; and providing truly exceptional customer service.
Our goal is to develop a value added combination for increasing revenue and controlling expenses that is rooted in developing and offering high-quality financial products and services; an existing branch network; electronic banking capabilities with 24/7 convenience; and providing truly exceptional customer service.
Management also continued to purchase taxable municipals and corporate securities to maintain a well-diversified portfolio. ​ Due to a combination of increased investment in securities, loan growth and total deposits modestly declining, short-term investments decreased throughout the year and are now at pre-pandemic levels before government stimulus impacted the economy.
Management also continued to purchase taxable municipals and corporate securities to maintain a well-diversified portfolio. ​ Due to a combination of increased investment in securities, loan growth and total deposits modestly declining, short-term investments decreased throughout 2022 and returned to pre-pandemic levels before government stimulus impacted the economy.
As of December 31, 2022 and 2021, municipal deposit letters of credit issued by the Federal Home Loan Bank of Pittsburgh on behalf of AmeriServ Financial Bank naming applicable municipalities as beneficiaries totaled $72.9 million and $62.2 million, respectively. The letters of credit serve as collateral, in place of pledged securities, for municipal deposits maintained at AmeriServ Financial Bank.
As of December 31, 2023 and 2022, municipal deposit letters of credit issued by the Federal Home Loan Bank of Pittsburgh on behalf of AmeriServ Financial Bank naming applicable municipalities as beneficiaries totaled $121.4 million and $72.9 million, respectively. The letters of credit serve as collateral, in place of pledged securities, for municipal deposits maintained at AmeriServ Financial Bank.
The average balance of FHLB term borrowings was lower in 2022 by $16.1 million, or 32.6%, as strength of the Company’s liquidity position allowed management to let FHLB term advances mature and not be replaced. 2021 NET INTEREST PERFORMANCE OVERVIEW.
The average balance of FHLB term borrowings was lower in 2022 by $16.1 million, or 32.6%, as strength of the Company’s liquidity position allowed management to let FHLB term advances mature and not be replaced.
Furthermore, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value.
Management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value or mature.
Total deposits continued to demonstrate stability over the past year despite a $16.3 million, or 1.4%, decrease in total average deposits when comparing the 2022 fourth quarter to last year’s fourth quarter. Deposit volumes continue to reflect the favorable impact of government stimulus which provided support to many Americans and financial assistance to municipalities and school districts during the pandemic.
Total deposits continued to demonstrate stability despite a $16.3 million, or 1.4%, decrease in total average deposits when comparing the 2022 fourth quarter to the 2021 fourth quarter. Deposit volumes continued to reflect the favorable impact of government stimulus which provided support to many Americans and financial assistance to municipalities and school districts during the pandemic.
Overall, the higher interest rate environment along with the higher average volumes of CRE, residential mortgages and home equity loans, resulted in total loan 17 Table of Contents interest income improving by $899,000, or 2.2%, for 2022 when compared to last year.
Overall, the higher interest rate environment along with the higher average volumes of CRE, residential mortgages and home equity loans, resulted in total loan interest income improving by $899,000, or 2.2%, for 2022 when compared to 2021.
There is a particular emphasis on ensuring that the subsidiary bank has appropriate levels of capital to support its non-owner occupied commercial real estate loan concentration, which stood at 29 Table of Contents 350% of regulatory capital at December 31, 2022.
There is a particular emphasis on ensuring that the subsidiary bank has appropriate levels of capital to support its non-owner occupied commercial real estate loan concentration, which stood at 375% of regulatory capital at December 31, 2023.
However, the decrease reflects a portion of the funds from the government stimulus programs leaving the balance sheet and also reflects greater pricing competition in the market to retain deposits because of the increasing national interest rates.
The modest decrease is reflective of a portion of the funds from the government stimulus programs leaving the balance sheet and also reflects greater pricing competition in the market to retain deposits because of the higher national interest rates.
Dividend payments from our subsidiaries also provide ongoing cash to the holding company. At December 31, 2022, our subsidiary Bank had $14.4 million of cash available for immediate dividends to the holding company under applicable regulatory formulas. Management follows a policy that limits dividend payments from the Trust Company to 75% of annual net income.
At December 31, 2023, our subsidiary Bank had $7.4 million of cash available for immediate dividends to the holding company under applicable regulatory formulas. Management follows a policy that limits dividend payments from the Trust Company to 75% of annual net income.
The Company’s loan to deposit ratio averaged 85.4% in the fourth quarter of 2022, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is well positioned to support our customers and our community during times of economic volatility.
The Company’s loan to deposit ratio averaged 86.4% in 2023, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is strongly positioned to support our customers and our community during times of economic volatility.
The improved earnings performance for the 2022 year, on both an actual and adjusted basis, reflects the full benefit of several important strategic actions that the Company executed in 2021, the successful management of our asset quality throughout the pandemic, and effective balance sheet management.
The improved earnings performance for the 2022 year reflected the full benefit of several important strategic actions that the Company executed in 2021, the successful management of our asset quality throughout the pandemic, and effective balance sheet management.
The higher interest rate environment along with increased investment in the securities portfolio more than offset a reduced level of Paycheck Protection Program (PPP) loan fee income and caused total interest income to increase for the full year of 2022 when compared to last year.
The higher interest rate environment along with increased investment in the securities portfolio more than offset a reduced level of Paycheck Protection Program (PPP) loan fee income and caused total interest income to increase for the full year of 2022 when compared to 2021. The increased national interest rates also resulted in total deposit and borrowing costs increasing in 2022.
Other assets increased $8.8 million, or 35.1%, as a result of an increase in the positive balance of the accrued pension liability, which totaled $21.3 million and $19.5 million as of December 31, 2022 and 2021, respectively.
Other assets increased $2.7 million, or 8.1%, as a result of an increase in the positive balance of the accrued pension liability, which totaled $24.7 million and $21.3 million as of December 31, 2023 and 2022, respectively.
The challenge remains as to the uncertainty regarding the duration that the existing government stimulus funds will remain on the balance sheet which will be determined by customer behavior as the economic conditions change. Diligent monitoring and management of our short-term investment position remains a priority.
The challenge remains as to the uncertainty regarding the duration that the higher than historical level of deposits will remain on the balance sheet which will be determined by customer behavior as the economic conditions change. Diligent monitoring and management of our short-term investment position and our level of overnight borrowed funds remains a priority.
INCOME TAX EXPENSE. The Company recorded an income tax expense of $1.8 million, or an effective tax rate of 19.1%, in 2022, compared to income tax expense of $1.7 million, or a 19.4% effective tax rate, in 2021, and compared to income tax expense of $1.2 million, or a 20.9% effective tax rate, in 2020.
INCOME TAX EXPENSE. The Company recorded an income tax benefit of $1.0 million in 2023, compared to income tax expense of $1.8 million, or a 19.1% effective tax rate, in 2022, and compared to income tax expense of $1.7 million, or a 19.4% effective tax rate, in 2021.
This is partially offset by the Company’s shorter duration investment securities portfolio and the scheduled repricing of loans tied to an index, such as SOFR or prime. Also, the Company has effectively utilized interest rate swaps for interest rate risk management purposes.
This was partially offset by the Company’s investment securities portfolio and the scheduled repricing of loans tied to an index, such as SOFR or prime. In addition to the interest rate hedges discussed above, the Company has effectively utilized interest rate swaps for interest rate risk management purposes.
Borrowings interest expense was favorably impacted by reduced interest 18 Table of Contents expense from Federal Home Loan Bank (FHLB) term borrowings, which declined by $322,000, or 36.8%, for the year.
Borrowings interest expense was favorably impacted by reduced interest expense from Federal Home Loan Bank (FHLB) term borrowings, which declined by $322,000, or 36.8%, for 2022.
The Company continues to be considered well capitalized for regulatory purposes with a risk based capital ratio of 13.87% and an asset leverage ratio of 8.52% at December 31, 2022.
The Company continues to be considered well capitalized for regulatory purposes with a risk based capital ratio of 13.03% and an asset leverage ratio of 7.80% at December 31, 2023.
The interest rate swaps allow our customers to lock in fixed interest rates while the Company retains the benefit of interest rates moving with the market. Regarding interest bearing liabilities, management continues its disciplined approach to price its core term deposit accounts in a controlled but competitive manner.
The interest rate swaps allow our customers to lock in fixed interest rates while the Company retains the benefit of interest rates moving with the market. Regarding interest bearing liabilities, the Company will continue its disciplined approach to price its core deposit accounts in a controlled but competitive manner and control the amount of overnight borrowed funds.
The following table summarizes the Company’s net interest income performance for each of the past three years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED DECEMBER 31, ​ 2022 2021 2020 ​ ​ (IN THOUSANDS, EXCEPT RATIOS) Interest income ​ $ 49,058 ​ $ 46,669 ​ $ 46,882 ​ Interest expense ​ 8,495 ​ 7,586 ​ 10,515 ​ Net interest income ​ 40,563 ​ 39,083 ​ 36,367 ​ Net interest margin ​ 3.27 % 3.15 % 3.19 % ​ 2022 NET INTEREST PERFORMANCE OVERVIEW.
The following table summarizes the Company’s net interest income performance for each of the past three years: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED DECEMBER 31, ​ 2023 2022 2021 ​ ​ (IN THOUSANDS, EXCEPT RATIOS) Interest income ​ $ 60,860 ​ $ 49,058 ​ $ 46,669 ​ Interest expense ​ 24,840 ​ 8,495 ​ 7,586 ​ Net interest income ​ 36,020 ​ 40,563 ​ 39,083 ​ Net interest margin ​ 2.86 % 3.27 % 3.15 % ​ 2023 NET INTEREST PERFORMANCE OVERVIEW.
The Company reported net income of $7.1 million, or $0.41 per diluted common share, for 2021. This represented a 51.9% increase in earnings per share from 2020 when net income totaled $4.6 million, or $0.27 per diluted common share.
The Company reported net income of $7.4 million, or $0.43 per diluted common share, in 2022. This represented a 4.9% increase in earnings per share from the full year of 2021 when net income totaled $7.1 million, or $0.41 per diluted common share.
It should be noted that this ratio weakened slightly from 347% at December 31, 2021 due to growth in total non-owner occupied commercial real estate loans between years. Our focus is on preserving capital to support customer lending and allow the Company to take advantage of business opportunities as they arise.
It should be noted that this ratio increased from 350% at December 31, 2022 due to growth in non-owner occupied commercial real estate loan balances as well as a slight decrease in total regulatory capital between years. Our focus is on preserving capital to support customer lending and allow the Company to take advantage of business opportunities as they arise.
The shift results from an increased level of short-term borrowings, which are immediately impacted by changes to national interest rates. The Comppany also experienced an increase balance of deposits that have an interest rate that is indexed to the market.
The shift primarily results from a substantial decrease in the level of short-term borrowings, which are immediately impacted by changes to national interest rates. The Company also experienced a modest decrease in the balance of deposits that have an interest rate that is indexed to the market.
At December 31, 2022, the Company had approximately 17.1 million common shares outstanding. The Basel III capital standards establish the minimum capital levels in addition to the well capitalized requirements under the federal banking regulations prompt corrective action. The capital rules also impose a 2.5% capital conservation buffer (CCB) on top of the three minimum risk-weighted asset ratios.
The Basel III capital standards establish the minimum capital levels in addition to the well capitalized requirements under the federal banking regulations prompt corrective action. The capital rules also impose a 2.5% capital conservation buffer (CCB) on top of the three minimum risk-weighted asset ratios.
As demonstrated historically, the Company continues its strategic conviction that a strong allowance for loan losses is needed, which has proven to be essential given the support provided to certain borrowers as they fully recover from the COVID-19 pandemic.
As demonstrated historically, the Company continued its strategic conviction that a strong allowance for credit losses was needed, which proved to be essential given the support provided to certain borrowers as they fully recovered from the COVID-19 pandemic.
Within investing activities, cash advanced for new loans originated totaled $223.7 million and was $6.9 million higher than the $216.8 million of cash received from loan principal payments. Within financing activities, total short-term borrowings increased by $88.6 million, total FHLB borrowings decreased by $22.9 million and total deposits decreased by $30.7 million.
Within investing activities, cash advanced for new loans originated totaled $200.8 million and was $50.9 million higher than the $149.9 million of cash received from loan principal payments. Within financing activities, total short-term borrowings decreased by $47.7 million, total FHLB borrowings increased by $24.8 million while total deposits increased by $49.9 million.
Overall, the loan to deposit ratio averaged 85.4% in the fourth quarter of 2022, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is strongly positioned to support our customers and our community during times of economic volatility. ​ Total interest expense for the full year of 2022 increased by $909,000, or 12.0%, when compared to the full year of 2021, due to higher deposit and short-term borrowings interest expense.
The loan to deposit ratio averaged 88.1% in the fourth quarter of 2023, which indicates that the Company has ample capacity to continue to grow its loan portfolio and is well positioned to support our customers and our community during times of economic volatility. ​ Total interest expense increased by $16.3 million, or 192.4%, for the full year of 2023 when compared to last year, due to higher deposit and borrowings interest expense.
The community banking segment reported a net income contribution of $12.4 million in 2022 which improved from the $12.1 million contribution in 2021 and also increased from the $10.1 million contribution in 2020.
The community banking segment reported a net income contribution of $11.5 million in 2023 which declined from the $12.4 million contribution in 2022 and also decreased from the $12.1 million contribution in 2021.
The increase in classified loans is the result of the risk rating downgrade of a large commercial real estate loan as well as a commercial and industrial loan relationship which were partially offset by the payoff of a substandard credit and the previously mentioned partial charge-down of a substandard credit during 2022.
The increase in classified loans is the result of the risk rating downgrade of three commercial real estate loan relationships which were partially offset by the risk rating upgrade of a commercial and industrial loan and commercial real estate loan as well as the charge-off of a substandard credit during 2023.
The following table summarizes some of the Company’s key profitability performance indicators for each of the past three years. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED DECEMBER 31, ​ 2022 2021 2020 ​ ​ (IN THOUSANDS, EXCEPT ​ ​ PER SHARE DATA AND RATIOS) ​ Net income ​ $ 7,448 ​ $ 7,072 ​ $ 4,598 ​ Net income, adjusted (1)(2) ​ ​ 9,470 ​ ​ 8,471 ​ ​ 4,598 ​ Diluted earnings per share ​ 0.43 ​ 0.41 ​ 0.27 ​ Diluted earnings per share, adjusted (1)(2) ​ ​ 0.55 ​ ​ 0.49 ​ ​ 0.27 ​ Return on average assets ​ 0.55 % 0.52 % 0.37 % Return on average assets, adjusted (1)(2) ​ ​ 0.70 ​ ​ 0.63 ​ ​ 0.37 ​ Return on average equity ​ 6.83 ​ 6.48 ​ 4.52 ​ Return on average equity, adjusted (1)(2) ​ 8.69 ​ 7.76 ​ 4.52 ​ ​ The Company reported net income of $7,448,000, or $0.43 per diluted common share, in 2022.
The following table summarizes some of the Company’s key profitability performance indicators for each of the past three years. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED DECEMBER 31, ​ 2023 2022 2021 ​ ​ (IN THOUSANDS, EXCEPT ​ ​ PER SHARE DATA AND RATIOS) ​ Net income (loss) ​ $ (3,346) ​ $ 7,448 ​ $ 7,072 ​ Diluted earnings per share ​ (0.20) ​ 0.43 ​ 0.41 ​ Return on average assets ​ (0.25) % 0.55 % 0.52 % Return on average equity ​ (3.23) ​ 6.83 ​ 6.48 ​ ​ The Company reported a net loss of $3,346,000, or $0.20 per diluted common share, in 2023.
The following table sets forth the calculation of the Company’s tangible common equity ratio and tangible book value per share at December 31, 2022 and 2021 (in thousands, except share and ratio data): ​ ​ ​ ​ ​ ​ ​ ​ AT DECEMBER 31, ​ ​ 2022 2021 Total shareholders’ equity $ 106,178 ​ $ 116,549 ​ Less: Intangible assets 13,739 ​ 13,769 ​ Tangible common equity 92,439 ​ 102,780 ​ Total assets 1,363,874 ​ 1,335,560 ​ Less: Intangible assets 13,739 ​ 13,769 ​ Tangible assets 1,350,135 ​ 1,321,791 ​ Tangible common equity ratio (non-GAAP) 6.85 % 7.78 % Total shares outstanding 17,117,617 ​ 17,081,500 ​ Tangible book value per share (non-GAAP) $ 5.40 ​ $ 6.02 ​ ​ CRITICAL ACCOUNTING POLICIES AND ESTIMATES.
The following table sets forth the calculation of the Company’s tangible common equity ratio and tangible book value per share at December 31, 2023 and 2022 (in thousands, except share and ratio data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ AT DECEMBER 31, ​ ​ 2023 2022 Total shareholders’ equity ​ $ 102,277 ​ $ 106,178 ​ Less: Intangible assets ​ 13,712 ​ 13,739 ​ Tangible common equity ​ 88,565 ​ 92,439 ​ Total assets ​ 1,389,638 ​ 1,363,874 ​ Less: Intangible assets ​ 13,712 ​ 13,739 ​ Tangible assets ​ 1,375,926 ​ 1,350,135 ​ Tangible common equity ratio (non-GAAP) ​ 6.44 % 6.85 % Total shares outstanding ​ 17,147,270 ​ 17,117,617 ​ Tangible book value per share (non-GAAP) ​ $ 5.16 ​ $ 5.40 ​ ​ CRITICAL ACCOUNTING POLICIES AND ESTIMATES.
Differences between the net interest spread and margin from a GAAP basis to a tax-equivalent basis were not material. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED DECEMBER 31, ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ ​ INTEREST ​ ​ ​ ​ ​ ​ INTEREST ​ ​ ​ ​ ​ ​ INTEREST ​ ​ ​ ​ AVERAGE ​ INCOME/ ​ YIELD/ ​ AVERAGE ​ INCOME/ ​ YIELD/ ​ AVERAGE ​ INCOME/ ​ YIELD/ ​ BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE ​ ​ (IN THOUSANDS, EXCEPT PERCENTAGES) Interest earning assets: ​ ​ ​ ​ ​ ​ ​ Loans, net of unearned income ​ $ 977,541 ​ $ 41,497 4.25 % $ 988,761 ​ $ 40,603 4.11 % $ 923,269 ​ $ 40,652 4.40 % Short-term investments and bank deposits ​ 23,213 ​ 209 0.90 ​ 46,977 ​ 58 0.12 ​ 19,955 ​ 100 0.50 ​ Commercial paper ​ — ​ — — ​ 329 ​ 2 0.52 ​ 12,013 ​ 146 1.21 ​ Investment securities: ​ ​ ​ ​ ​ ​ ​ Available for sale ​ 185,710 ​ 5,610 3.02 ​ 159,458 ​ 4,543 2.85 ​ 145,788 ​ 4,591 3.15 ​ Held to maturity ​ 59,516 ​ 1,755 2.95 ​ 50,434 ​ 1,481 2.94 ​ 41,994 ​ 1,417 3.37 ​ Total investment securities ​ 245,226 ​ 7,365 3.00 ​ 209,892 ​ 6,024 2.87 ​ 187,782 ​ 6,008 3.20 ​ TOTAL INTEREST EARNING ASSETS/ INTEREST INCOME ​ 1,245,980 ​ 49,071 3.95 ​ 1,245,959 ​ 46,687 3.76 ​ 1,143,019 ​ 46,906 4.11 ​ Non-interest earning assets: ​ ​ ​ ​ ​ ​ ​ Cash and due from banks ​ 17,602 ​ ​ ​ ​ 18,736 ​ ​ ​ ​ 18,091 ​ ​ ​ ​ Premises and equipment ​ 17,498 ​ ​ ​ ​ 17,749 ​ ​ ​ ​ 18,439 ​ ​ ​ ​ Other assets ​ 77,194 ​ ​ ​ ​ 77,806 ​ ​ ​ ​ 70,867 ​ ​ ​ ​ Allowance for loan losses ​ (11,895) ​ ​ ​ ​ (11,919) ​ ​ ​ ​ (9,732) ​ ​ ​ ​ TOTAL ASSETS ​ $ 1,346,379 ​ ​ ​ ​ ​ ​ $ 1,348,331 ​ ​ ​ ​ ​ ​ $ 1,240,684 ​ ​ ​ ​ ​ ​ Interest bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest bearing deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest bearing demand ​ $ 227,838 ​ $ 1,198 ​ 0.53 % $ 213,736 ​ $ 248 ​ 0.12 % $ 175,088 ​ $ 483 ​ 0.28 % Savings ​ 137,845 ​ 135 ​ 0.10 ​ 126,050 ​ 173 ​ 0.14 ​ 104,442 ​ 148 ​ 0.14 ​ Money market ​ 289,674 ​ 2,008 ​ 0.69 ​ 297,844 ​ 673 ​ 0.23 ​ 234,771 ​ 1,031 ​ 0.44 ​ Other time ​ 285,760 ​ 3,083 ​ 1.08 ​ 305,251 ​ 3,712 ​ 1.22 ​ 345,228 ​ 5,972 ​ 1.73 ​ Total interest bearing deposits ​ 941,117 ​ 6,424 ​ 0.68 ​ 942,881 ​ 4,806 ​ 0.51 ​ 859,529 ​ 7,634 ​ 0.89 ​ Federal funds purchased and other short-term borrowings ​ 9,268 ​ 364 ​ 3.97 ​ 389 ​ 1 ​ 0.37 ​ 4,947 ​ 29 ​ 0.58 ​ Advances from Federal Home Loan Bank ​ 33,253 ​ 553 ​ 1.66 ​ 49,328 ​ 875 ​ 1.77 ​ 64,046 ​ 1,099 ​ 1.72 ​ Guaranteed junior subordinated deferrable interest debentures ​ — ​ — ​ — ​ 9,741 ​ 944 ​ 9.69 ​ 13,085 ​ 1,121 ​ 8.57 ​ Subordinated debt ​ 27,000 ​ 1,054 ​ 3.90 ​ 15,079 ​ 854 ​ 5.66 ​ 7,650 ​ 520 ​ 6.80 ​ Lease liabilities ​ 3,446 ​ 100 ​ 2.89 ​ 3,729 ​ 106 ​ 2.86 ​ 3,949 ​ 112 ​ 2.84 ​ TOTAL INTEREST BEARING LIABILITIES/INTEREST EXPENSE ​ 1,014,084 ​ 8,495 ​ 0.84 ​ 1,021,147 ​ 7,586 ​ 0.75 ​ 953,206 ​ 10,515 ​ 1.10 ​ Non-interest bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Demand deposits ​ 215,196 ​ ​ ​ ​ ​ 211,557 ​ ​ ​ ​ ​ 175,336 ​ ​ ​ ​ ​ Other liabilities ​ 8,113 ​ ​ ​ ​ ​ 6,446 ​ ​ ​ ​ ​ 10,340 ​ ​ ​ ​ ​ Stockholders’ equity ​ 108,986 ​ ​ ​ ​ ​ 109,181 ​ ​ ​ ​ ​ 101,802 ​ ​ ​ ​ ​ TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY ​ $ 1,346,379 ​ ​ ​ ​ ​ ​ $ 1,348,331 ​ ​ ​ ​ ​ ​ $ 1,240,684 ​ ​ ​ ​ ​ ​ Interest rate spread ​ ​ ​ ​ ​ 3.11 ​ ​ ​ ​ ​ 3.01 ​ ​ ​ ​ ​ 3.01 ​ Net interest income/net interest margin (non-GAAP) ​ ​ ​ 40,576 ​ 3.27 % ​ ​ 39,101 ​ 3.15 % ​ ​ 36,391 ​ 3.19 % Tax-equivalent adjustment ​ ​ ​ (13) ​ ​ ​ ​ ​ (18) ​ ​ ​ ​ ​ (24) ​ ​ ​ Net interest income (GAAP) ​ ​ ​ ​ $ 40,563 ​ ​ ​ ​ ​ $ 39,083 ​ ​ ​ ​ ​ $ 36,367 ​ ​ ​ ​ Net interest income may also be analyzed by segregating the volume and rate components of interest income and interest expense.
Differences between the net interest spread and margin from a GAAP basis to a tax-equivalent basis were not material. 23 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ YEAR ENDED DECEMBER 31, ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ INTEREST ​ ​ ​ ​ ​ ​ INTEREST ​ ​ ​ ​ ​ ​ INTEREST ​ ​ ​ ​ AVERAGE ​ INCOME/ ​ YIELD/ ​ AVERAGE ​ INCOME/ ​ YIELD/ ​ AVERAGE ​ INCOME/ ​ YIELD/ ​ BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE ​ ​ (IN THOUSANDS, EXCEPT PERCENTAGES) Interest earning assets: ​ ​ ​ ​ ​ ​ ​ Loans, net of unearned income ​ $ 997,204 ​ $ 51,643 5.18 % $ 977,541 ​ $ 41,497 4.25 % $ 988,761 ​ $ 40,603 4.11 % Short-term investments and bank deposits ​ 3,942 ​ 251 6.38 ​ 23,213 ​ 209 0.90 ​ 46,977 ​ 58 0.12 ​ Commercial paper ​ — ​ — — ​ — ​ — — ​ 329 ​ 2 0.52 ​ Investment securities: ​ ​ ​ ​ ​ ​ ​ Available for sale ​ 201,077 ​ 7,059 3.51 ​ 185,710 ​ 5,610 3.02 ​ 159,458 ​ 4,543 2.85 ​ Held to maturity ​ 61,090 ​ 1,922 3.15 ​ 59,516 ​ 1,755 2.95 ​ 50,434 ​ 1,481 2.94 ​ Total investment securities ​ 262,167 ​ 8,981 3.43 ​ 245,226 ​ 7,365 3.00 ​ 209,892 ​ 6,024 2.87 ​ TOTAL INTEREST EARNING ASSETS/ INTEREST INCOME ​ 1,263,313 ​ 60,875 4.84 ​ 1,245,980 ​ 49,071 3.95 ​ 1,245,959 ​ 46,687 3.76 ​ Non-interest earning assets: ​ ​ ​ ​ ​ ​ ​ Cash and due from banks ​ 15,446 ​ ​ ​ ​ 17,602 ​ ​ ​ ​ 18,736 ​ ​ ​ ​ Premises and equipment ​ 17,270 ​ ​ ​ ​ 17,498 ​ ​ ​ ​ 17,749 ​ ​ ​ ​ Other assets ​ 75,111 ​ ​ ​ ​ 77,194 ​ ​ ​ ​ 77,806 ​ ​ ​ ​ Allowance for credit losses ​ (13,066) ​ ​ ​ ​ (11,895) ​ ​ ​ ​ (11,919) ​ ​ ​ ​ TOTAL ASSETS ​ $ 1,358,074 ​ ​ ​ ​ ​ ​ $ 1,346,379 ​ ​ ​ ​ ​ ​ $ 1,348,331 ​ ​ ​ ​ ​ ​ Interest bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest bearing deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest bearing demand ​ $ 225,713 ​ $ 4,058 ​ 1.80 % $ 227,838 ​ $ 1,198 ​ 0.53 % $ 213,736 ​ $ 248 ​ 0.12 % Savings ​ 127,539 ​ 124 ​ 0.10 ​ 137,845 ​ 135 ​ 0.10 ​ 126,050 ​ 173 ​ 0.14 ​ Money market ​ 302,964 ​ 7,457 ​ 2.46 ​ 289,674 ​ 2,008 ​ 0.69 ​ 297,844 ​ 673 ​ 0.23 ​ Other time ​ 306,044 ​ 9,375 ​ 3.06 ​ 285,760 ​ 3,083 ​ 1.08 ​ 305,251 ​ 3,712 ​ 1.22 ​ Total interest bearing deposits ​ 962,260 ​ 21,014 ​ 2.18 ​ 941,117 ​ 6,424 ​ 0.68 ​ 942,881 ​ 4,806 ​ 0.51 ​ Federal funds purchased and other short-term borrowings ​ 35,755 ​ 1,944 ​ 5.44 ​ 9,268 ​ 364 ​ 3.97 ​ 389 ​ 1 ​ 0.37 ​ Advances from Federal Home Loan Bank ​ 22,167 ​ 731 ​ 3.30 ​ 33,253 ​ 553 ​ 1.66 ​ 49,328 ​ 875 ​ 1.77 ​ Guaranteed junior subordinated deferrable interest debentures ​ — ​ — ​ — ​ — ​ — ​ — ​ 9,741 ​ 944 ​ 9.69 ​ Subordinated debt ​ 27,000 ​ 1,054 ​ 3.90 ​ 27,000 ​ 1,054 ​ 3.90 ​ 15,079 ​ 854 ​ 5.66 ​ Lease liabilities ​ 3,238 ​ 97 ​ 3.00 ​ 3,446 ​ 100 ​ 2.89 ​ 3,729 ​ 106 ​ 2.86 ​ TOTAL INTEREST BEARING LIABILITIES/INTEREST EXPENSE ​ 1,050,420 ​ 24,840 ​ 2.36 ​ 1,014,084 ​ 8,495 ​ 0.84 ​ 1,021,147 ​ 7,586 ​ 0.75 ​ Non-interest bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Demand deposits ​ 191,580 ​ ​ ​ ​ ​ 215,196 ​ ​ ​ ​ ​ 211,557 ​ ​ ​ ​ ​ Other liabilities ​ 12,507 ​ ​ ​ ​ ​ 8,113 ​ ​ ​ ​ ​ 6,446 ​ ​ ​ ​ ​ Shareholders’ equity ​ 103,567 ​ ​ ​ ​ ​ 108,986 ​ ​ ​ ​ ​ 109,181 ​ ​ ​ ​ ​ TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY ​ $ 1,358,074 ​ ​ ​ ​ ​ ​ $ 1,346,379 ​ ​ ​ ​ ​ ​ $ 1,348,331 ​ ​ ​ ​ ​ ​ Interest rate spread ​ ​ ​ ​ ​ 2.48 ​ ​ ​ ​ ​ 3.11 ​ ​ ​ ​ ​ 3.01 ​ Net interest income/net interest margin (non-GAAP) ​ ​ ​ 36,035 ​ 2.86 % ​ ​ 40,576 ​ 3.27 % ​ ​ 39,101 ​ 3.15 % Tax-equivalent adjustment ​ ​ ​ (15) ​ ​ ​ ​ ​ (13) ​ ​ ​ ​ ​ (18) ​ ​ ​ Net interest income (GAAP) ​ ​ ​ ​ $ 36,020 ​ ​ ​ ​ ​ $ 40,563 ​ ​ ​ ​ ​ $ 39,083 ​ ​ ​ ​ Net interest income may also be analyzed by segregating the volume and rate components of interest income and interest expense.
Factors contributing to the higher non-interest expense in 2022 included: ● the Company was required to recognize a settlement charge in connection with its defined benefit pension plan in 2022, which is explained in Note 17, Employee Benefit Plans.
Non-interest expense for 2022 totaled $48.0 million and increased by $1.0 million, or 2.2%, from 2021. Factors contributing to the higher non-interest expense in 2022 included: ● the Company was required to recognize a settlement charge in connection with its defined benefit pension plan in 2022, which is explained in Note 16, Employee Benefit Plans.
Within total salaries and benefits expense, salaries cost increased by $1.4 million, or 7.8%, due to merit increases and a higher level of full-time equivalent employees as the Company has been able to fill certain open positions this year.
Within total salaries and benefits expense, salaries cost increased by $1.4 million, or 7.8%, due to merit increases and a higher level of full-time equivalent employees as the Company was able to fill certain open positions during 2022. Also, contributing to the higher salaries and employee benefits costs were additional increases to health care, payroll taxes and other employee benefits.
The Company’s written lending policies require underwriting, loan documentation, and credit analysis standards to be met prior to funding any loan. After the loan has been approved and funded, continued periodic credit review is required. The Company’s policy is to individually review, as circumstances warrant, each of its commercial and commercial mortgage loans to determine if a loan is impaired.
The Company’s written lending policies require underwriting, loan documentation, and credit analysis standards to be met prior to funding any loan. After the loan has been approved and funded, continued periodic credit review is required.
Overall, in 2022, the average balance of total interest earning assets was consistent with the full year 2021 average, totaling $1.2 billion. Specifically, total loans averaged $978 million in 2022 which is $11.2 million, or 1.1%, lower than the 2021 full year average.
Overall, in 2023, the average balance of total interest earning assets was modestly higher than the full year of 2022 average, totaling $1.3 billion. Specifically, total loans averaged $997.2 million in 2023 which is $19.7 million, or 2.0%, higher than the 2022 full year average.
Short-term investments including commercial paper averaged $23.2 million in 2022 which is $24.1 million, or 50.9%, lower than the 2021 full year average. Total investment securities averaged $245.2 million in 2022 which is $35.3 million, or 16.8%, higher than the 2021 full year average.
Specifically, total loans averaged $978 million in 2022 which was $11.2 million, or 1.1%, lower than the 2021 full year average. Short-term investments including commercial paper averaged $23.2 million in 2022 which was $24.1 million, or 50.9%, lower than the 2021 full year average.
Total short-term investments including commercial paper averaged $23.2 million in 2022, which is $24.1 million, or 50.9%, lower than the 2021 average. Despite this decline, the Company’s liquidity position remains strong.
Total short-term investments including commercial paper averaged $23.2 million in 2022, which is $24.1 million, or 50.9%, lower than the 2021 average. Despite this decline, the Company’s liquidity position remained strong. ​ On the liability side of the balance sheet, total average deposits for 2022 were relatively consistent with the 2021 full year average, exceeding by $1.9 million, or 0.2%.
Changes in net 21 Table of Contents interest income that could not be specifically identified as either a rate or volume change were allocated proportionately to changes in volume and changes in rate. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 vs. 2021 ​ 2021 vs. 2020 ​ ​ INCREASE (DECREASE) ​ INCREASE (DECREASE) ​ ​ DUE TO CHANGE IN: ​ DUE TO CHANGE IN: ​ ​ AVERAGE ​ ​ ​ ​ ​ ​ ​ AVERAGE ​ ​ ​ ​ ​ ​ ​ VOLUME RATE TOTAL VOLUME RATE TOTAL ​ ​ (IN THOUSANDS) INTEREST EARNED ON: ​ ​ ​ ​ ​ ​ Loans, net of unearned income ​ $ (468) ​ $ 1,362 ​ $ 894 ​ $ 2,750 ​ $ (2,799) ​ $ (49) Short-term investments and bank deposits ​ (42) ​ 193 ​ 151 ​ 70 ​ (112) ​ (42) Commercial paper ​ (1) ​ (1) ​ (2) ​ (91) ​ (53) ​ (144) Investment securities: ​ ​ ​ ​ ​ ​ ​ ​ Available for sale ​ 783 ​ 284 ​ 1,067 ​ 410 ​ (458) ​ (48) Held to maturity ​ 269 ​ 5 ​ 274 ​ 260 ​ (196) ​ 64 Total investment securities ​ 1,052 ​ 289 ​ 1,341 ​ 670 ​ (654) ​ 16 Total interest income ​ 541 ​ 1,843 ​ 2,384 ​ 3,399 ​ (3,618) ​ (219) INTEREST PAID ON: ​ ​ ​ ​ ​ ​ Interest bearing demand deposits ​ 18 ​ 932 ​ 950 ​ 91 ​ (326) ​ (235) Savings deposits ​ 16 ​ (54) ​ (38) ​ 25 ​ — ​ 25 Money market ​ (19) ​ 1,354 ​ 1,335 ​ 226 ​ (584) ​ (358) Other time deposits ​ (225) ​ (404) ​ (629) ​ (637) ​ (1,623) ​ (2,260) Federal funds purchased and other short-term borrowings ​ 255 ​ 108 ​ 363 ​ (20) ​ (8) ​ (28) Advances from Federal Home Loan Bank ​ (270) ​ (52) ​ (322) ​ (256) ​ 32 ​ (224) Guaranteed junior subordinated deferrable interest debentures ​ (472) ​ (472) ​ (944) ​ (311) ​ 134 ​ (177) Subordinated debt ​ 524 ​ (324) ​ 200 ​ 434 ​ (100) ​ 334 Lease liabilities ​ (7) ​ 1 ​ (6) ​ (7) ​ 1 ​ (6) Total interest expense ​ (180) ​ 1,089 ​ 909 ​ (455) ​ (2,474) ​ (2,929) Change in net interest income ​ $ 721 ​ $ 754 ​ $ 1,475 ​ $ 3,854 ​ $ (1,144) ​ $ 2,710 ​ LOAN QUALITY.
Changes in net interest income that could not be specifically identified as either a rate or volume change were allocated proportionately to changes in volume and changes in rate. 24 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 vs. 2022 ​ 2022 vs. 2021 ​ ​ INCREASE (DECREASE) ​ INCREASE (DECREASE) ​ ​ DUE TO CHANGE IN: ​ DUE TO CHANGE IN: ​ ​ AVERAGE ​ ​ ​ ​ ​ ​ ​ AVERAGE ​ ​ ​ ​ ​ ​ ​ VOLUME RATE TOTAL VOLUME RATE TOTAL ​ ​ (IN THOUSANDS) INTEREST EARNED ON: ​ ​ ​ ​ ​ ​ Loans, net of unearned income ​ $ 854 ​ $ 9,292 ​ $ 10,146 ​ $ (468) ​ $ 1,362 ​ $ 894 Short-term investments and bank deposits ​ (300) ​ 342 ​ 42 ​ (42) ​ 193 ​ 151 Commercial paper ​ — ​ — ​ — ​ (1) ​ (1) ​ (2) Investment securities: ​ ​ ​ ​ ​ ​ ​ ​ Available for sale ​ 489 ​ 960 ​ 1,449 ​ 783 ​ 284 ​ 1,067 Held to maturity ​ 47 ​ 120 ​ 167 ​ 269 ​ 5 ​ 274 Total investment securities ​ 536 ​ 1,080 ​ 1,616 ​ 1,052 ​ 289 ​ 1,341 Total interest income ​ 1,090 ​ 10,714 ​ 11,804 ​ 541 ​ 1,843 ​ 2,384 INTEREST PAID ON: ​ ​ ​ ​ ​ ​ Interest bearing demand deposits ​ (11) ​ 2,871 ​ 2,860 ​ 18 ​ 932 ​ 950 Savings deposits ​ (11) ​ — ​ (11) ​ 16 ​ (54) ​ (38) Money market ​ 96 ​ 5,353 ​ 5,449 ​ (19) ​ 1,354 ​ 1,335 Other time deposits ​ 235 ​ 6,057 ​ 6,292 ​ (225) ​ (404) ​ (629) Federal funds purchased and other short-term borrowings ​ 1,399 ​ 181 ​ 1,580 ​ 255 ​ 108 ​ 363 Advances from Federal Home Loan Bank ​ (230) ​ 408 ​ 178 ​ (270) ​ (52) ​ (322) Guaranteed junior subordinated deferrable interest debentures ​ — ​ — ​ — ​ (472) ​ (472) ​ (944) Subordinated debt ​ — ​ — ​ — ​ 524 ​ (324) ​ 200 Lease liabilities ​ (6) ​ 3 ​ (3) ​ (7) ​ 1 ​ (6) Total interest expense ​ 1,472 ​ 14,873 ​ 16,345 ​ (180) ​ 1,089 ​ 909 Change in net interest income ​ $ (382) ​ $ (4,159) ​ $ (4,541) ​ $ 721 ​ $ 754 ​ $ 1,475 ​ LOAN QUALITY.
The Company’s deferred tax asset was $2.8 million at December 31, 2022 compared to a deferred tax liability of $934,000 at December 31, 2021, resulting primarily from the decrease in the fair value of the available for sale investment securities portfolio. SEGMENT RESULTS.
The Company’s deferred tax asset was $2.7 million at December 31, 2023 compared to $2.8 million at December 31, 2022, resulting primarily from the change in the allowance for credit losses which was offset by the change in the the fair value of the available for sale investment securities portfolio and the pension liability. 30 Table of Contents SEGMENT RESULTS.
The Company can also use various interest rate contracts, such as interest rate swaps, caps, floors and swaptions to help manage interest rate and market valuation risk exposure, which is incurred in normal recurrent banking activities.
The Company had various outstanding commitments to extend credit approximating $236.6 million and standby letters of credit of $8.2 million as of December 31, 2023. 37 Table of Contents The Company can also use various interest rate contracts, such as interest rate swaps, caps, floors and swaptions to help manage interest rate and market valuation risk exposure, which is incurred in normal recurrent banking activities.
The entire ALL is available to absorb future loan losses in any loan category. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ AT DECEMBER 31, ​ ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ 2018 ​ ​ ​ ​ ​ PERCENT ​ ​ ​ ​ PERCENT ​ ​ ​ ​ PERCENT ​ ​ ​ ​ PERCENT ​ ​ ​ ​ PERCENT ​ ​ ​ ​ ​ OF LOANS ​ ​ ​ ​ OF LOANS ​ ​ ​ ​ OF LOANS ​ ​ ​ ​ OF LOANS ​ ​ ​ ​ OF LOANS ​ ​ ​ ​ IN EACH ​ ​ ​ IN EACH ​ ​ ​ ​ IN EACH ​ ​ ​ IN EACH ​ ​ ​ IN EACH ​ ​ ​ ​ ​ CATEGORY ​ ​ ​ ​ CATEGORY ​ ​ ​ CATEGORY ​ ​ ​ ​ CATEGORY ​ ​ ​ ​ CATEGORY ​ ​ ​ ​ ​ ​ TO TOTAL ​ ​ ​ TO TOTAL ​ ​ ​ ​ TO TOTAL ​ ​ ​ TO TOTAL ​ ​ ​ TO TOTAL ​ ​ AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS ​ ​ (IN THOUSANDS, EXCEPT PERCENTAGES) ​ Commercial $ 2,653 ​ 23.1 % $ 3,071 ​ 25.5 % $ 3,472 ​ 31.4 % $ 3,951 ​ 30.1 % $ 3,057 ​ 29.0 % Commercial loans secured by non-owner occupied real estate ​ 5,972 45.5 ​ 6,392 43.8 ​ 5,373 41.2 ​ 3,119 41.2 ​ 3,389 41.4 ​ Real estate – residential mortgage ​ 1,380 30.1 ​ 1,590 29.2 ​ 1,292 25.7 ​ 1,159 26.6 ​ 1,235 27.6 ​ Consumer ​ 85 1.3 ​ 113 1.5 ​ 115 1.7 ​ 126 2.1 ​ 127 2.0 ​ Allocation to general risk ​ 653 — ​ 1,232 — ​ 1,093 — ​ 924 — ​ 863 — ​ Total ​ $ 10,743 100.0 % $ 12,398 100.0 % $ 11,345 100.0 % $ 9,279 100.0 % $ 8,671 100.0 % ​ Even though residential real estate mortgage loans comprise 30.1% of the Company’s total loan portfolio, only $1.4 million, or 12.8%, of the total ALL is allocated against this loan category.
The entire allowance for credit losses is available to absorb future loan losses in any loan category. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ AT DECEMBER 31, ​ ​ 2023 ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ ​ ​ ​ ​ PERCENT ​ ​ ​ ​ PERCENT ​ ​ ​ ​ PERCENT ​ ​ ​ ​ PERCENT ​ ​ ​ ​ PERCENT ​ ​ ​ ​ ​ OF LOANS ​ ​ ​ ​ OF LOANS ​ ​ ​ ​ OF LOANS ​ ​ ​ ​ OF LOANS ​ ​ ​ ​ OF LOANS ​ ​ ​ ​ IN EACH ​ ​ ​ IN EACH ​ ​ ​ ​ IN EACH ​ ​ ​ IN EACH ​ ​ ​ IN EACH ​ ​ ​ ​ ​ CATEGORY ​ ​ ​ ​ CATEGORY ​ ​ ​ CATEGORY ​ ​ ​ ​ CATEGORY ​ ​ ​ ​ CATEGORY ​ ​ ​ ​ ​ ​ TO TOTAL ​ ​ ​ TO TOTAL ​ ​ ​ ​ TO TOTAL ​ ​ ​ TO TOTAL ​ ​ ​ TO TOTAL ​ ​ AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS ​ ​ (IN THOUSANDS, EXCEPT PERCENTAGES) ​ Commercial real estate (owner occupied) $ 1,529 ​ 8.6 % $ — ​ — % $ — ​ — % $ — ​ — % $ — ​ — % Other commercial and industrial ​ ​ 3,030 ​ 15.4 ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ Commercial (owner occupied real estate and other) ​ ​ — ​ — ​ ​ 2,653 ​ 23.1 ​ ​ 3,071 ​ 25.5 ​ ​ 3,472 ​ 31.4 ​ ​ 3,951 ​ 30.1 ​ Commercial real estate (non-owner occupied) - retail ​ ​ 3,488 ​ 15.6 ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ Commercial real estate (non-owner occupied) - multi-family ​ ​ 1,430 ​ 10.6 ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ Other commercial real estate (non-owner occupied) ​ 3,428 23.1 ​ 5,972 45.5 ​ 6,392 43.8 ​ 5,373 41.2 ​ 3,119 41.2 ​ Residential mortgages ​ 1,021 16.8 ​ 1,380 30.1 ​ 1,590 29.2 ​ 1,292 25.7 ​ 1,159 26.6 ​ Consumer ​ 1,127 9.9 ​ 85 1.3 ​ 113 1.5 ​ 115 1.7 ​ 126 2.1 ​ Allocation to general risk ​ — — ​ 653 — ​ 1,232 — ​ 1,093 — ​ 924 — ​ Total ​ $ 15,053 100.0 % $ 10,743 100.0 % $ 12,398 100.0 % $ 11,345 100.0 % $ 9,279 100.0 % ​ The disproportionately higher allocations for commercial loans, including commercial loans secured by owner occupied real estate and commercial & industrial loans, and commercial loans secured by non-owner occupied real estate reflect the increased credit risk associated with those types of lending, the Company’s historical loss experience in these categories, and other qualitative factors.
The Company’s net interest income for the full year of 2022 increased by $1.5 million, or 3.8%, when compared to the full year of 2021. The Company’s net interest margin was 3.27% for the full year of 2022 representing a 12 basis point improvement from the full year of 2021.
The Company’s net interest income for the full year of 2023 decreased by $4.5 million, or 11.2%, when compared to the full year of 2022. The Company’s net interest margin was 2.86% for the full year of 2023 representing a 41-basis point decline from the full year of 2022.
Overall, the increase in net interest income, along with a reduced loan loss provision, more than offset a lower level of non-interest income and higher non-interest expense resulting in an improved earnings performance in 2022. Finally, the Company’s tangible book value per share ended 2022 at $5.40 (1) a decrease of 10.3% from 2021.
Overall, the increase in net interest income, along with a reduced loan loss provision, more than offset a lower level of non-interest income and higher non-interest expense resulting in an improved earnings performance in 2022. The Company reported net income of $7.1 million, or $0.41 per diluted common share, for 2021.
Despite the growth in average earning assets, interest income was unfavorably impacted by a decrease in the earning asset yield which declined by 35 basis points from 4.11% to 3.76%. All categories within the earning asset base demonstrated an interest income decrease between years.
Interest income was favorably impacted by an increase in the earning asset yield which improved by 89 basis points from 3.95% to 4.84%. All categories within the earning asset base demonstrated an interest income increase between years.
We anticipate that we will maintain our strong capital ratios throughout 2023. Capital generated from earnings will be utilized to pay the common stock cash dividend and will support controlled balance sheet growth. Our common dividend payout ratio for the full year 2022 was 26.7%. Total Parent Company cash was $9.6 million at December 31, 2022.
Capital generated from earnings will be utilized to pay the common stock cash dividend and will support controlled balance sheet growth. Total Parent Company cash was $8.2 million at December 31, 2023.
Cash and cash equivalents decreased by $18.1 million from December 31, 2021, to $22.9 million at December 31, 2022, due to $56.3 million of net cash used in investing activities which more than offset $32.9 million of net cash provided by financing activities and $5.2 million of net cash provided by operating activities.
Cash and cash equivalents decreased by $8.9 million from December 31, 2022, to $14.0 million at December 31, 2023, due to $40.0 million of net cash used in investing activities more than offsetting $24.8 million of net cash provided in financing activities and $6.3 million of net cash provided by operating activities.
The increased national interest rates also resulted in total deposit and borrowing costs increasing in 2022. However, the increase in deposit interest expense was partially offset by a 26% reduction in total borrowings interest expense, as the strategic actions taken by management in 2021 to lower funding costs favorably impacted financial performance.
However, the increase in deposit interest expense was partially offset by a 26% reduction in total borrowings interest expense, as the strategic actions taken by management in 2021 to lower funding costs favorably impacted financial performance. Overall, in 2022, the average balance of total interest earning assets was consistent with the full year 2021 average, totaling $1.2 billion.
The increase in non-performing assets, as well as non-accrual loans, reflects the partial charge-down and transfer of one commercial real estate loan relationship into non-accrual status while the borrower pursues the sale of the property. Total classified loans increased $6.8 million since the prior year-end and now total $23.8 million.
The increase in non-performing assets, as well as non-accrual loans, primarily reflects the partial charge-down and transfer into non-accrual status of one commercial real estate loan for a mixed-use retail/office property that has Rite Aid as a major tenant. Total classified loans increased $1.2 million since the prior year-end and now total $25.0 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe Company uses its credit policy and disciplined approach to evaluating the adequacy of the allowance for loan losses to control and manage credit risk. The Company’s investment policy and hedging policy strictly limit the amount of credit risk that may be assumed in the investment portfolio and through hedging activities.
Biggest changeThe Company uses its credit policy and disciplined approach to evaluating the adequacy of the allowance for credit losses to control and manage credit risk. The Company’s investment policy and hedging policy strictly limit the amount of credit risk that may be assumed in the investment portfolio and through hedging activities.
For information regarding the market risk of the Company’s financial instruments, see “Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations — Interest Rate Sensitivity.” The Company’s principal market risk exposure is to interest rates. ​ ​ 39 Table of Contents
For information regarding the market risk of the Company’s financial instruments, see “Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations — Interest Rate Sensitivity.” The Company’s principal market risk exposure is to interest rates. ​ ​ 42 Table of Contents

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